The views of Keynes on Trade policy are clear: Protectionism as well as hoarding a surplus in the balance of payment are wrong. This paper analyzes the optimality of protectionist policies and having a surplus in the context of the international political system. I show that in the situation of a hegemonic country, all classes - the working class as well as the elite - opt for free trade. But, in a balance of power context, wherein no single actor on the international scene possesses hegemonic status, the working class will choose protectionism, having a surplus, asking for harsh reparations, while the transnational elite and Keynes will not.
This paper analyzes the conflicts of interest arising from the "revolving door". The revolving door is a common phenomenon, and it is unlikely that most of it can be explained by "regulatory capture", a practice that is unlawful. Therefore, there is a need for a new framework. This paper proposes a framework wherein conflicts of interest arising from the revolving door are not unlawful, as is in the case of regulatory capture, but still lead to economic distortions. The paper introduces a market for bureaucratic capital, which explains why in equilibrium, the government allows this unethical, yet not unlawful, conflict of interest to persist. Our first result is that the political elite finds it optimal to allow the existence of the revolving door, as well as the creation of bureaucratic capital. The second result is that in equilibrium, the revolving door leads to an excessive level of bureaucratic capital. As a consequence, the interconnection of elites and the existence of the revolving door actually lead to lower economic growth.
This paper analyzes the interconnection between elites and its effects on economic growth. For decades, the bureaucratic elite has been joining the business elite after leaving office, and this in growing numbers. This relationship has been termed the revolving door in English, pantouflage in French, and amakudari [descent from heaven] in Japanese. The purpose of this paper is to explain why this social behavior takes place, and why the political elite does not try to prevent it. Moreover, this paper shows that the bureaucratic elite obtains excessive bureaucratic power, and that promiscuous elites actually lead to lower economic growth.
AbstractThis paper presents a new framework for analyzing automation, robotics, and high‐tech, which differs from the canonical model of technological progress by incorporating the higher education system. The main difference is that there is not just one type of skilled workers, but two types, and there is not one type of education but two ‐ elite universities and standard ones. The gap between these two types of education is called 'elitism gap'. The 'elitism gap' in the higher‐education sector enables a separation of individuals by their abilities. Since the economy is divided between low‐tech and high‐tech sectors, the elitism gap leads to a separating equilibrium in which, high‐ability workers graduating from top universities work in the high‐tech sector, while low‐ability workers, graduate from standard universities and work in the low‐tech industries. In consequence, human capital in both industries is different, which leads to wage inequality. We then analyze the effects of an increased use of robotics on inequality. We show that robots affect the "matching effect" between abilities and education, and in consequence, inequality increases. We also show that wages and productivity gaps between high‐tech and low‐tech sectors are fueled by the elitism gap in higher education. This leads to heterogeneity in human capital, and therefore to an increase in wage inequality. We develop an index of the elitism gap, and show a positive correlation between the index of elitism gap and inequality in OECD countries.
AbstractThis paper shows that the revolving door generates inequality of influence between financial firms and creates economic distortions. We first develop a theoretical model, introducing the notion of "bureaucratic capital" and stressing how the revolving door generates inequality in bureaucratic capital leading to inequality in profits. Then this prediction is tested, using a new database that tracks the revolving door process involving the 20 biggest US "diversified banks." We show that regulators who supply a large stock of bureaucratic capital are more likely to be hired by the top five banks. We also develop indices of the inequality of influence between banks. We show that banks in the top revenue quintile concentrate around 80% of revolving door movements. Goldman Sachs appears as the prime beneficiary of this process, capturing approximately 30% of the total stock of bureaucratic capital.
As early on as in the writings of Montesquieu and Adam Smith, geography plays a preponderant role in explaining disparity of development between nation‐states. Smith placed the emphasis on topography, and especially on the role of coasts and rivers in the development of regions. For Montesquieu, climate was an element essential to economic development: His theory asserted that climate may substantially influence the nature and development of human societies. For a long time, economists did not pay attention to geography, and this field was left to sociologists, historians, and geographers. Only lately economists have started analyzing the impact of geography, and this article will examine the various avenues of research that have been taken, wherein the notion of geography mostly encompasses matters related to location, soils, and topography; and yet also climate and epidemiology. The first part focuses on the relationship between geography and economics, while the second part relates geography to political systems and public economics.
