John Joseph Wallis

Limited Access Orders in the Developing World: A New Approach to the Problems of Development

The upper-income, advanced industrial countries of the world today all have market economies with open competition, competitive multi-party democratic political systems, and a secure government monopoly over violence. Such open access orders, however, are not the only norm and equilibrium type of society. The middle and low-income developing countries today, like all countries before about 1800, can be understood as limited access orders that maintain their equilibrium in a fundamentally different way. In limited access orders, the state does not have a secure monopoly on violence, and society organizes itself to control violence among the elite factions. A common feature of limited access orders is that political elites divide up control of the economy, each getting some share of the rents. Since outbreaks of violence reduce the rents, the elite factions have incentives to be peaceable most of the time. Adequate stability of the rents and thus of the social order requires limiting access and competition-hence a social order with a fundamentally different logic than the open access order. This paper lays out such a framework and explores some of its implications for the problems of development today.

Employment, Politics, and Economic Recovery during the Great Depression

In earlier studies, economic historians found that political goals, rather than social or humanitarian objectives, motivated much of New Deal spending. Using new information on annual, state level employment for the 1930s, this paper shows that, while politics are still important, responding to the needs of the unemployed was an important determinant of New Deal spending.

Banks and State Public Finance in the New Republic: The United States, 1790–1860

The U.S. Constitution, by taking away the power of the states to issue paper money, removed a major source of flexibility in state public finance. In their search for new sources of revenue and fiscal flexibility, the states discovered that the banks they chartered could fill the gap. Investment earnings and tax revenues derived from banks soon became major elements of state public finance. We discuss the nature of these early business-government relationships and provide the first systematic assessment of their relative importance in state finance.

In the Shadow of Violence: Politics, Economics, and the Problems of Development

1. Limited access orders: an introduction to the conceptual framework Douglass C. North, John Joseph Wallis, Steven B. Webb and Barry R. Weingast 2. Bangladesh: economic growth in a vulnerable LAO Mushtaq H. Khan 3. Fragile states, elites, and rents in the Democratic Republic of Congo (DRC) Kai Kaiser and Stephanie Wolters 4. Seeking the elusive developmental knife-edge: Zambia and Mozambique - a tale of two countries Brian Levy 5. Limited access orders: the Philippines Gabriella R. Montinola 6. Indias vulnerable maturity: experiences of Maharashtra and West Bengal Pallavi Roy 7. Entrenched insiders: limited access order in Mexico Alberto Diaz-Cayeros 8. From limited access to open access order in Chile, take two Patricio Navia 9. Transition from a limited access order to an open access order: the case of South Korea Jong-Sung You 10. Lessons: in the shadow of violence Douglass North, John Wallis, Steven Webb and Barry Weingast.

Employment in the Great Depression: New data and hypotheses

Abstract The traditional source of information on employment during the Great Depression is the BLS establishment sample, the foundation of Lebergotts employment and unemployment estimates. The sample was collected in detail sufficient to estimate total nonagricultural, manufacturing, and nonmanufacturing employment series at the state level for every year between 1930 and 1940. The resulting series have several features of interest: a marked variation in the employment experience of different regions that is not attributable to differences in the industrial composition of employment across regions; a southern economy which suffered smaller employment declines during the Great Crash and more rapid recovery after 1933 than the rest of the nation; and indications that several New Deal programs may have significantly affected private employment.

Public Relief and Private Employment in the Great Depression

The unemployment relief programs introduced by the federal government in the 1930s were the largest single factor in the growth of the federal budget over the decade. We develop a model that enables us to estimate the effects of the relief programs on private employment. Cross-sectional data bearing on the operation of the Federal Emergency Relief Administration rejects the hypothesis that the federal relief programs reduced private employment. Individuals did respond to the incentives of relief benefits, but only by moving between relief and non-relief unemployment.

Violence and the Rise of Open-Access Orders

The problem of controlling the use of force and those who are best at wielding it is foundational to human collective life. For most of history, a social order that was relatively “closed” has seemed the most natural way to manage this problem. But over the past century or two, a transition from closed- to open-access orders has led to the emergence of societies with widespread political participation, the use of elections to select governments, constitutional arrangements to limit and define the powers of government, and unbiased application of the rule of law. For most of history, a closed social order has seemed the most “natural” way to manage the problem of controlling the use of force. The rise of modern democracy can be understood only in the context of the transition to open-access orders.

What Determines the Allocation of National Government Grants to the States

During the New Deal the federal government initiated a policy of massive grants to states for support of social welfare and other programs. Since that time grants have come to be an integral part of the American fiscal system, and scholars have continued to debate whether the allocation of federal grants between the states is motivated primarily by political or social and economic objectives. This paper shows that, during the 1930s, both political and economic effects were important determinants of grant allocation, but that the Congressional factors considered by Anderson and Tollison are not important while the Presidential factors considered by Wright are. When the analysis is extended to the years 1932 to 1982, however, Congressional influences do seem important. On the other hand, the dominant influence on federal grant policy over the larger sample appears to be state government expenditures, while both political and economic influences play a smaller role.

Fiscal Challenges: Dysfunctional or Optimal Institutions? State Debt Limitations, the Structure of State and Local Governments, and the Finance of American Infrastructure

This book is designed to enable readers to perceive and understand connections that they might have overlooked: connections among different disciplines; connections among budgetary institutions in the legislative and executive branches of federal and state governments; connections between U.S. budgetary policy and fiscal policy in other countries; connections between the perceptions of voters and policymakers and actual budget policy. In this section, we examine more closely intergovernmental connections that influence fiscal outcomes. John Joseph Wallis and Barry Weingast’s examination of state constitutional debt limitations and their effect on the choice of financing methods for infrastructure differs from previous chapters in two crucial ways. First, they provide the first sustained analysis of local governments and their role in fiscal policy as they issue bonds to build roads, schools, sports stadiums, and other public goods. Any complete assessment of local government must take account of state constitutional and statutory provisions because local governments are created by the state and their powers are dramatically affected by state decisions. Second, Wallis and Weingast provide a different sort of comparative analysis than we have seen before: their analysis is historical, comparing infrastructure financing in the United States at three different periods over a 150-year time span. Although other chapters may have provided some historical context for contemporary budget institutions, this chapter is the most sustained empirical comparison of budget institutions and their consequences across a substantial period of time. The authors’ historical analysis explains aspects of the current constitutional structure that governs state and local government debt, a structure that developed over time as public officials reacted to financial crises brought about by previous policies. The result is a complex and fragmented local government system, consisting of many institutions focused on particular purposes, such as school, water, and sewer districts, alongside more traditional institutions, such as cities and counties. These special governments often have different

The anatomy of sovereign debt crises: Lessons from the American state defaults of the 1840s

Abstract In theory, sovereign states with taxing powers should not have to default on their debts, but in practice they sometimes do default. In the context of the U.S. state defaults of the 1840s, the paper draws attention to a neglected factor in explanations of sovereign defaults, namely, revenue structure, or the mix of revenue sources used to fund state expenditures. Constraints of revenue structure interacted with political considerations and economic expectations to cause nine states to default on their debts in the early 1840s. We identify two cases of default: developed states that chose to default and less developed states that had little choice but to default.