A Theory of the Size and Number of Nations

by on August 1, 2017 at 11:07 am in Economics, History, Law | Permalink

Gancia, Ponzetto, Ventura provide a precis to their very interesting theory about the size and number of nations.

Before 1950, more than one third of all territorial disputes were decided by war, while after that date diplomacy prevailed in almost 90% of cases.

Why did the first wave of globalisation lead to political concentration and conflict? Why did the second wave of globalisation lead instead to political fragmentation, resolved in a more peaceful way? To answer these questions, in a new paper we develop a model to study the interaction between globalisation and political structure (Gancia et al. 2017). A key premise of our theory is that borders hamper trade and globalisation make borders more costly. We show that political structure adapts to expanding trade opportunities in a non-monotonic way. In early stages, borders are removed by increasing the size of countries. In later stages, the cost of borders is removed by creating economic unions, and this leads to a reduction in the size of countries. Moreover, while the incentive to conquer markets through aggression increases with globalisation, international economic unions remove this incentive, thereby paving the way to the rule of diplomacy.

This point is very good:

Since the size of markets grows rapidly while political borders tend to change slowly, it suggests that globalisation is likely to put more pressure on the world’s political structure. Designing political institutions that can optimally adapt may become one of the major challenges faced by modern societies.

The full paper is here.

1 JWatts August 1, 2017 at 11:12 am

“Designing political institutions that can optimally adapt may become one of the major challenges faced by modern societies.”

A good point. I’m not sure it’s a new challenge however.

2 Lanigram August 1, 2017 at 12:09 pm

Designing is the easy part, imposing is tricky.

3 JWatts August 1, 2017 at 12:25 pm

Imposing is probably the wrong word. But yes, obtaining adaptive political institutions is hard. That being said, it appears the bulk of the world is headed that way. Market based Democratic Republics seem to be Waxing, every other type of government is on the Wane.

4 Lanigram August 1, 2017 at 12:52 pm

I mostly agree. However, China is not on the wane. Cultural traditions are sticky. The ethos of the USA is very different from China. The EU is a bit of a mish mash, like an unhappy marriage. The EU contains the seeds of it’s own destruction – a social liberalism that encourages a socially non-liberal element to invade the body politic. The national immune system is mot attacking the invader, and the DNA of the political organism is being repaced. The ethos is imperiled. Bye bye EU,

That leaves Asia, Africa, and the Americas. The USA is fortunate to share borders with Mexico and Canada. Despite all the gnashing of teeth in the USA over immigration induced culture change, Mexicans are assimilating into the US nicely. We can work with Mexico.

Asia is interesting. China is an ambitious rising superpower. India?

Then there is Africa, a big question mark.

5 JWatts August 1, 2017 at 3:15 pm

“I mostly agree. However, China is not on the wane. Cultural traditions are sticky. Th”

Yes, that’s a good point. China is clearly moving towards a market based economy but eschewing the move toward some form of Republicanism.

6 prior_test3 August 2, 2017 at 4:39 am

‘The ethos is imperiled. Bye bye EU’

Yep, fascism and ethno-nationalism remain a larger problem in Europe than most places, and the memory of the last time those ideas gained the upper hand in Europe is truly fading from living memory.

7 Adrian Ratnapala August 1, 2017 at 3:43 pm

It is better to think in terms of evolving than designing.

The point being that even if you end up as kingmaker or constitution writer for a day, you grand vision is not going to end up implemented as designed. So you are better off figuring out whatever action you can take that has a solid incremental gain.

If you want a longer term effect, then your best bet is to create knowledge that later generations can use — even if it gatheres dust for decades between creation and use.

8 Tanturn August 1, 2017 at 11:17 am

Stupid theory. The authors should spend some time reviewing the history of decolonization, specifically, the economic policies persued by the nearly independent countries. They generally did not include “economic unions” with their former colonizers.

9 Anonymous August 1, 2017 at 12:01 pm

There was a Nike factory in Vietnam before there was a Presidential visit.

10 Right Wing House Music August 1, 2017 at 5:19 pm

I would argue that the theory is stupid because all this took place during the dawn of the nuclear age. When the cost of starting a war is potentially infinite, economic cooperation is the only path to prosperity.

11 Tanturn August 1, 2017 at 5:52 pm

You’re missing the point. Call it “the only path to prosperity” if you want, it isn’t what decolonized nations actually did.

12 CorvusB August 1, 2017 at 11:26 am

VERY interesting thoughts. Speaking of “* Designing political institutions that can optimally adapt . . . *”, how about China? They are certainly doing their best to adapt, and seemingly, from this viewpoint, not in a positive way. Nor are they the only ones.
But the pressure is certainly there – all over. What is also interesting is the role that very sticky cultural mores play in both the increasing number of nations, and in “Designing political institutions . . .”.

13 Lanigram August 1, 2017 at 12:11 pm

Exactly correct!

14 rayward August 1, 2017 at 11:30 am

Globalization today is a far cry from the globalization in the past. How so? In the past, globalization was mostly a colonization model, with undeveloped countries supplying raw materials and developed countries supplying the finished goods. Today, by contrast, undeveloped countries are supplying the finished goods as well as raw materials. Thus, in the past labor in developed countries was aligned with the owners of capital in developed countries, Today, by contrast, labor in developed countries is in conflict with the owners of capital in developed countries who, ironically, are aligned with the owners of capital in undeveloped countries. Hence the spectacle of Terry Gou aligned with Steve Jobs and smooching with Donald Trump. The thing about this new alignment is that there are far more in the class of labor than in the class of owners of capital, so don’t be surprised if diplomacy gives way to war. Another irony is that Donald Trump, in the class of owners of capital, is inciting the class of labor in developed countries, increasing the likelihood of war between developed countries and undeveloped countries.

15 Lanigram August 1, 2017 at 11:36 am

Or worse, within countries…

16 Meh August 3, 2017 at 2:58 am

+10

17 Brett Champion August 1, 2017 at 11:35 am

It’s an interesting theory, but I think a better answer as to why war for territory has decreased as much as it has is that it’s generally no longer an acceptable means of settling a border dispute, and especially so among the states that actually have the power to conquer territory.

Of course, no single explanation is sufficient. There are numerous changes that have occurred in recent decades to both reduce the attraction of territorial conquest and to raise the costs of attempting it.

18 Lanigram August 1, 2017 at 11:40 am

Pax nuclea – the ritual of proxy wars continues, but wars of conquest are constrained by MAD.

19 msgkings August 1, 2017 at 12:35 pm

And even proxy wars are getting more rare, and of lower intensity. Nothing like a Vietnam has happened since.

20 Lanigram August 1, 2017 at 12:58 pm

True if you only consider US caualties.

There are proxy wars in the mid-east. Consider Syria – Iran//Russia vs ????

The Syrian theater is creating trouble for Lebanon and sending refugees into the EU. There will be consequences.

21 msgkings August 1, 2017 at 1:55 pm

Not sure I’d call a civil war a ‘proxy war’, isn’t that when superpowers fight each other using some poor Third World country as the battleground? Syria is more the former.

The Mideast has ALWAYS been a violent place, with or without US involvement.

22 Locke August 1, 2017 at 11:04 pm

magkings:

It’s perhaps s bit of both. There are certainly elements of a proxy war going on with Turkish, Russian, Iranian, American and Saudi patronage at play.

23 JWatts August 1, 2017 at 11:39 am

“Another irony is that Donald Trump, in the class of owners of capital, is inciting the class of labor in developed countries, increasing the likelihood of war between developed countries and undeveloped countries.”

Not in the real world he’s not. Donald Trump has not tried to ignite a class war. He hasn’t urged the workers to start a war with another country outside of some internal delusional fantasies that you may be maintaining.

24 Lanigram August 1, 2017 at 11:58 am

Peter Drucket covered this in “Management challenges in the 21st Century” – globalized economics vs political fragmentation, or free-lunches vs tribal affiliation. So far, the free lunches are keeping the EU together. Tribal affiliation just won in the USA and little England.

A much bigger but too-scary-to-think-about question is this:

Will UBI placate the new useless majority or will the unlimited evolutionary demand for male social status drive the barbarians to storm the gated communities of the elite?

Mark Blyth predicts the latter.

What does Tyler predict, acknowleding his assettion that the predictive capacity of economics is limited?

The ‘new’ thinking is we are predictably irrational.

Watch out for normalcy bias.

It could get ugly.

25 Lanigram August 1, 2017 at 12:12 pm

Peter Drucker…

26 JWatts August 1, 2017 at 12:13 pm

” globalized economics vs political fragmentation, or free-lunches vs tribal affiliation.”

That’s a poor analysis. Growing the income $1 trillion to a minority group and lowering $900 billion from the income of another minority certainly grows the pie, but it’s just as certainly not a “free lunch” to a significant minority. Several studies are indicative that the gains from global trade haven’t been evenly spread and there have been sizable groups that are net losers.

Classifying it as a “free” lunch and ignoring the losers is why you end up with tribal affiliation. The tribe that’s losing out is paying for the lunch.

27 Lanigram August 1, 2017 at 12:32 pm

Actually, we are in total agreement. My post was too obtuse.

The only disagreement is I think tribalism is always present – it is, literally, in our DNA. We can negotiate across tribal boundaries as long as the result is beneficial. When it isn’t, look out. Brexit and Trump are the consequences. I think, given the current trajectory, things are going to get worse. I think we might even see violence within the USA. That troubles me – I have two teenagers and I worry about their future.

28 JWatts August 1, 2017 at 3:27 pm

“The only disagreement is I think tribalism is always present – it is, literally, in our DNA. ”

I don’t disagree with that statement.

“I think we might even see violence within the USA.”

There could be and it could lead to a true civil cold war versus the current tensions and cultural clashes. But to date, the only cultural violence we’ve seen is the occasional group of Leftie protestors smashing windows and cars in their own areas. Things look pretty peaceful. Compare with the domestic situation in the US in the 1960’s. That seems like it was a lot closer to a Cold War.

29 Art Deco August 1, 2017 at 11:59 am

Before 1950, more than one third of all territorial disputes were decided by war, while after that date diplomacy prevailed in almost 90% of cases.

How many boundary disputes have they’re been since 1950? The disputes in the Western Hemisphere have concerned boundaries running through tropical rain forest and implicate tiny human populations. African disputes have included those actually contested by force of arms (Spanish Sahara, Ogaden) and those in desert zones almost empty of people (Libya – Chad). There were undefined boundaries on the Arabian peninsula (in areas where nobody lived). The Kashmir has been disputed – by force of arms and underhanded asymmetric means. Most of the Kashmir nearly empty of settlement. There is, however, a portion where someone lives.

30 Ray Lopez August 1, 2017 at 12:11 pm

the paper only proves the following two points:

1/ “Trade follows the flag” – the old US imperialist maxim. – once you have a “Pax Americanus” and there’s only one superpower (in the free world), globalization follows. In the 19th century, there was a Pax Britannicus. In the 0th century, a Pax Romana. During Columbus’ time, a Pax Espanol. In all such periods globalization followed. The USSR had it’s own sphere of influence.

2/ “Democracies do not fight each other” – the Hawaiian professor’s theme, he wrote a book on it.

31 Lanigram August 1, 2017 at 12:16 pm

Do you mean “The End of Fistory”?

Better put your dukes up! Fistory comin’ at ya!

32 JWatts August 1, 2017 at 12:20 pm

1/ “Trade follows the flag”

It’s probably more indirect. Pax Americanus lead to stability. Stability leads to “globalization”. Globalization being in this case: lots of movement of goods, people, currency, culture and relative standardization of measures and ideas.

33 Roy LC August 1, 2017 at 12:50 pm

The most destructive war in human history ends with the use of an incredible weapon that makes direct war between states possessing it virtually impossible. The state using this weapon has a 150 year old revolutionary policy of opposing the creation of Empires and calling for the break up of existing ones. The major imperial states are greatly weakened, bankrupt and now almost completely dependent on this same state, who uses this power to promote their breakup.

The only state that can rival the first state is also revolutionary and has since its revolution called for the abolition of other nation states and has made this the core of its foreign policy and this state soon aquires the incredible weapon.

This study begins five years after this war ends. The number and quality of confounding factors is astounding.

34 Roger Sweeny August 1, 2017 at 2:41 pm

Thank you for injecting some sense here.

35 JWatts August 1, 2017 at 3:28 pm

+67 years of cherry picked data

36 Prankeapple August 2, 2017 at 3:43 am

Precisely. You’ve gotta love academics attempting to create grand, all-encompassing political theories out of data from a very specific historical context. I don’t see the word ‘nuclear’ mentioned once in that paper.

37 BigEd August 1, 2017 at 4:41 pm

The development of nuclear weapons right after the end of the most devastating two wars in human history (one in Europe the other in Asia) might have opened some eyes around the world.

38 Wonks Anonymous August 1, 2017 at 4:51 pm

A while back David Friedman wrote a paper on how tariffs vs income taxes affected the size & shape of nations:
http://www.daviddfriedman.com/Academic/Size_of_Nations/Size_of_Nations.html

39 Rafael R August 1, 2017 at 6:07 pm

I think that the 1950 divide can be understood in two ways: first, nuclear weapons dramatically lowered the costs of retaliation to aggression, as result countries cannot just go into war against other countries and expect to survive without losing a large fraction of their population. Second, before 1950 the world’s center of political power was in Europe, divided into several great powers, after 1950 the world was divided into only two superpowers an each had it’s own regional block and was far away from each other, so that warfare became much more unlikely, even without nuclear weapons. After 1990 the world became unipolar in geopolitical terms, so the likely-hood of warfare became even smaller.

40 nigel August 1, 2017 at 9:03 pm

Thank you for (mostly) saying what I was going to say in a much less charitable way. Let’s see, what’s more likely…a physics-esque explanation set in terms of general, eternal principles, or a historical narrative? Can we be sure this tendency is experimentally replicable? How would one devise the experiment? What conditions would one set? Would the bomb be a part of the experiment, or not? I mean please. I’ll take stupid answers for $200, Alex. The Bomb and the Cold War produced what tendency in international relations….?

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