Comments on: Natural and Artificial States, and Firms

By: David Emanuel Andersson

David Emanuel Andersson — Tue, 23 May 2006 14:25:38 +0000

Peter: I kind of agree, but I think we need a two-dimensional approach which takes the degree of central planning in any jurisdiction into account. My “hypothesis” would be that if we have no or or very little central planning, then the boundaries and ethnic rfagmentation don’t matter, while in jurisdictions with lots of planning and little economic freedom, conflicts are more likely generally, and also politicians may appeal to ethnic loyalties etc…..although maybe also sub-ethnic loyalties like class, religion etc.

By: Peter Klein

Peter Klein — Mon, 22 May 2006 13:37:26 +0000

David: No disagreement here. In fact, I've blogged below on Jacobs externalities and how they're generally underappreciated in the clustering literature. One important distinction, though, is that the spillovers discussed by Jacobs apply to cases of voluntary diversity. Whether the same spillover benefits accrue under coercively enforced diversity, as in the case of colonial boundaries, is an open question. Another question is the extent to which Jacobs's within-city economies of diversity apply across cities, within larger territorial areas such as countries (the unit of analysis for Rothbard and Alesina et al.).

By: David Emanuel Andersson

David Emanuel Andersson — Mon, 22 May 2006 07:36:31 +0000

The idea that ethnic or cultural homogeneity is more productive seems like a rather simplistic application of the transaction cost approach. Rural areas/jurisdictions tend to be far more homogeneous than large cities, yet their productivity and – especially – innovative performance is almost always inferior to the large and more multicultural (fragmented) cities. As Jane Jacobs has argued quite convincingly, innovation and creativity is often the result of combination of diverse ideas that tend to be more easily perceived in heterogeneous cities, giving rise to a type of agglomeration activities known as “urbanization economies.” Indeed, many of the most succesful jurisdictions in the history of the world have been more-heterogeneous-than-average city states such as Venice, Bruges, Amsterdam, Homg Kong, Singapore as well as unusually diverse cities in relatively diverse countries such as London and New York for the last 200 years or cities like early 20th century Vienna or Shanghai.

Jung-Chin: I think your comment regarding Taiwan is somewhat beside the point. If coastal China had not been subjected to central planning, it is likely that a free flow of factors between the cities of Taiwan and the cities of eastern and southern mainland China would have accelerated the development of all regional economies, although – of course – the relative performance as opposede to the absolute performance of Taiwan may have lagged behind the Pearl River Delta and Shanghai regions.

By: Jung-Chin Shen

Jung-Chin Shen — Mon, 22 May 2006 00:04:03 +0000

The conclusion of the paper is very different from one case which I know in details—Taiwan and China. Some Taiwanese economist estimate that Taiwan’s GDP per capita would be similar to the coast provinces of China had they not separated over the past 100 years (except for 1945-1949). According to my understanding of the two countries’ situations, I personally believe the result is plausible. Yes, one case cannot overrule the econometric results. But it shows one potential problem with the measure of squiggliness: it fails to distinguish between land and ocean separation. Charles Darwin seems to know this subject better. :)