Timur Kuran

Now Out of Never: The Element of Surprise in the East European Revolution of 1989

Like many major revolutions in history, the East European Revolution of 1989 caught its leaders, participants, victims, and observers by surprise. This paper offers an explanation whose crucial feature is a distinction between private and public preferences. By suppressing their antipathies to the political status quo, the East Europeans misled everyone, including themselves, as to the possibility of a successful uprising. In effect, they conferred on their privately despised governments an aura of invincibility. Under the circumstances, public opposition was poised to grow explosively if ever enough people lost their fear of exposing their private preferences. The currently popular theories of revolution do not make clear why uprisings easily explained in retrospect may not have been anticipated. The theory developed here fills this void. Among its predictions is that political revolutions will inevitably continue to catch the world by surprise.

Sparks and prairie fires: A theory of unanticipated political revolution

A feature shared by certain major revolutions is that they were not anticipated. Here is an explanation, which hinges on the observation that people who come to dislike their government are apt to hide their desire for change as long as the opposition seems weak. Because of this preference falsification, a government that appears unshakeable might see its support crumble following a slight surge in the oppositions apparent size, caused by events insignificant in and of themselves. Unlikely though the revolution may have appeared in foresight, it will in hindsight appear inevitable because its occurrence exposes a panoply of previously hidden conflicts.

Availability Cascades and Risk Regulation

An availability cascade is a self-reinforcing process of collective belief formation by which an expressed perception triggers a chain reaction that gives the perception of increasing plausibility through its rising availability in public discourse. The driving mechanism involves a combination of informational and reputational motives: Individuals endorse the perception partly by learning from the apparent beliefs of others and partly by distorting their public responses in the interest of maintaining social acceptance. Availability entrepreneurs - activists who manipulate the content of public discourse - strive to trigger availability cascades likely to advance their agendas. Their availability campaigns may yield social benefits, but sometimes they bring harm, which suggests a need for safeguards. Focusing on the role of mass pressures in the regulation of risks associated with production, consumption, and the environment, Professor Timur Kuran and Cass R. Sunstein analyze availability cascades and suggest reforms to alleviate their potential hazards. Their proposals include new governmental structures designed to give civil servants better insulation against mass demands for regulatory change and an easily accessible scientific database to reduce peoples dependence on popular (mis)perceptions.

Why the Middle East is Economically Underdeveloped: Historical Mechanisms of Institutional Stagnation

Although a millennium ago the Middle East was not an economic laggard, by the 18th century it exhibited clear signs of economic backwardness. The reason for this transformation is that certain components of the regions legal infrastructure stagnated as their Western counterparts gave way to the modern economy. Among the institutions that generated evolutionary bottlenecks are the Islamic law of inheritance, which inhibited capital accumulation; the absence in Islamic law of the concept of a corporation and the consequent weaknesses of civil society; and the waqf, which locked vast resources into unproductive organizations for the delivery of social services. All of these obstacles to economic development were largely overcome through radical reforms initiated in the nineteenth century. Nevertheless, traditional Islamic law remains a factor in the Middle Easts ongoing economic disappointments. The weakness of the regions private economic sectors and its human capital deficiency stand among the lasting consequences of traditional Islamic law.

The Inevitability of Future Revolutionary Surprises

Although social scientists have written extensively on revolutions, none of their theories has shown much predictive success in practice. Recent revolutions surprised social scientists as much as anyone else. This article proposes that revolutionary surprises will occur repeatedly, although it is possible to identify countries relatively likely to experience a sudden explosion. The argument hinges on preference falsification-the act of misrepresenting ones preferences under perceived social pressures. By falsifying their preferences with regard to the incumbent regime, disgruntled citizens distort perceptions of the potential for political change. The articles key proposition may be refuted by building a model that successfully predicts when and where revolutions will occur.

The Islamic Commercial Crisis: Institutional Roots of Economic Underdevelopment in the Middle East

During the second millennium, the Middle Easts commerce with Western Europe fell increasingly under European domination. Two factors played critical roles. First, the Islamic inheritance system, by raising the costs of dissolving a partnership following a partners death, kept Middle Eastern commercial enterprises small and ephemeral. Second, certain European inheritance systems facilitated large and durable partnerships by reducing the likelihood of premature dissolution. The upshot is that European enterprises grew larger than those of the Islamic world. Moreover, while ever larger enterprises propelled further organizational transformations in Europe, persistently small enterprises inhibited economic modernization in the Middle East. f one challenge of the social sciences is to account for the rise of the West,I another is to explain how the Islamic Middle East2 became an underdeveloped region.3 A major symptom of this decline was that Muslim merchants lost ground to Westerners, and eventually also to religious minorities living in their midst. By the nineteenth century, when much of the Middle East fell prey to European colonialism, the Muslim role in the regions trade with Western Europe had slipped to insignificance.4 Moreover, many lucrative components of the Middle Easts internal commerce had come to be dominated by local Christians and Jews.5 Although these patterns were not uniform across places or sectors, there is no serious disagreement over the general trends of interest here.

Ethnic Norms and Their Transformation Through Reputational Cascades

Ethnic norms are the ethnically symbolic behavioral codes that individuals must follow to retain social acceptance. They are sustained partly by sanctions that individuals impose on each other in trying to establish good credentials. This essay analyzes the “ethnification” process through which ethnic norms become more demanding. The argument hinges on interdependencies among individual behaviors. These allow one persons adjustments to trigger additional adjustments through a reputational cascade—a self‐reinforcing process by which people motivated to protect and enhance their reputations induce each other to step up their ethnic activities. According to the analysis, a society exhibiting low ethnic activity generates social forces tending to preserve that condition; but if these forces are overcome, the result may be massive ethnification. One implication is that similarly developed societies may exhibit very different levels of ethnic activity. Another is that ethnically based hatreds constitute by‐products of ethnification rather than its mainspring.

Private and Public Preferences

The theory of revealed preference, which lies at the core of the neoclassical economic method, asserts that peoples preference orderings are revealed by their actions. This assertion has two possible meanings, of which one is a truism and the other false. When a person joins a riot against the government, he reveals through this action that he would rather riot than not. This is the sense in which the assertion is a truism. But if one means that the person must want a change of government, this is certainly false. His decision to riot could mean only that he considers it dangerous to stay on the sidelines.

The Absence of the Corporation in Islamic Law: Origins and Persistence

Classical Islamic law recognizes only natural persons; it does not grant standing to corporations. This article explores why Islamic law did not develop a concept akin to the corporation, or borrow one from another legal system. It also identifies processes that delayed the diffusion of the corporation to the Middle East even as its role in the global economy expanded. Community building was central to Islams mission, so early Muslim jurists had no use for a concept liable to facilitate factionalism. Services with large setup costs and expected to last indefinitely were supplied through the waqf, an unincorporated trust. The waqf thus absorbed resources that might otherwise have stimulated an incorporation movement. Partly because the waqf spawned constituencies committed to preserving its key features, until modern times private merchants and producers who stood to profit from corporate powers were unable to muster the collective action necessary to reform the legal system. For their part, Muslim rulers took no initiatives of their own to supply the corporate form of organization, because they saw no commercial or financial organizations worth developing for the sake of boosting tax revenue.Classical Islamic law recognizes only natural persons; it does not grant standing to imagined, juristic persons. This article identifies self-reinforcing processes that kept Islamic law from developing a concept of legal personhood indigenously. Community building being central to Islam’s mission, the early promoters of Islam had no use for a concept liable to facilitate factionalism. In subsequent centuries the typical Muslim-owned commercial or financial enterprise was too small, and too limited in scope, to justify lobbying for advanced organizational forms; and Muslim rulers made no attempt to supply the corporate form of organization, because in the absence of merchant organizations they saw no structures worth exploiting for their own ends. Why the Islamic Middle East Did not Generate an Indigenous Corporate Law Timur Kuran* Department of Economics University of Southern California Los Angeles, CA 90089-0253, USA

The logic of financial westernization in the Middle East

In the nineteenth century the steps taken to modernize the Middle Easts financial system included the legalization of interest, the establishment of secular courts open to both actual and juristic persons, and new banking regulations based largely on Western models. Exploring why they involved the transplant of foreign institutions, this paper shows that certain elements of Islamic law blocked evolutionary paths that might have generated a modern financial system through indigenous means. These sources of rigidity included (1) the Islamic law of commercial partnerships, which limited enterprise continuity; (2) the Islamic inheritance system, which restrained capital accumulation; (3) the waqf (pious foundation) system, which inhibited the pooling of resources; and (4) the Islamic legal systems aversion to the concept of juristic personality, which limited the capabilities of private organizations. Even before the financial advances of the nineteenth century, the regions non-Muslim minorities had come to dominate key economic sectors, including finance. Non-Muslim merchants and financiers improved their relative positions because, unlike their Muslim counterparts, they could operate under the jurisdiction of Western courts.