Understanding the economics of limited access orders: incentives, organizations and the chronology of developments

Abstract

In ‘Violence and Social Orders’, North, Wallis and Weingast highlight the need of societies to control large-scale violence. In response to this need, a variety of social orders has emerged with differing institutional, political and economic characteristics. One of these social orders is the limited access order that was prevalent in most of history and still is nowadays. Taking the conceptual framework of Northet al.as a starting point, we make three advances to their analysis of limited access orders. First, we analyse the incentive structure of actors involved, using a formal model of the main interactions in a limited access order. Second, we decompose organizations into two types and analyse their respective roles. Third, we use insights from historical research to scrutinize the chronology of the rise of organizations. Jointly, this allows us to refine and substantiate the insights gained by Northet al., highlight the role of organizations and place the start of relevant developments earlier in time.

Multinational enterprises, political institutions, and violence: a case study from Mozambique

“…A recent contribution by Van Bavel et al . (2017) provides a good starting point for addressing these problems. The authors criticize that NWW, without considering individual incentives, almost take it for granted that enterprises prefer to be connected to a member of the dominant coalition in an LAO.…”

Elite collective agency and the state

“…As Van Bavel et al (2017) remark, the productive base that elites extract from resembles a common pool resource where each individual elite has control over a part. Over-extraction and rent dissipation are salient problems since property rights are not secure under conditions of violent power competition.…”

“…In Skaperdas (1998) coalitions arise when they present opportunities for increasing productivity, and in Garfinkel (2004) their size dampens the intensity of conflict because of free-rider dynamics. Closest to this paper, Van Besouw et al (2016) and Van Bavel et al (2017), model elite coalitions in natural states , as discussed in North et al (2009). Conceptualizing the productive base of the economy as a common pool resource, they analyze equilibrium states where elites’ payoff in and out of coalition are equal and find that a tradeoff exists between order and resources .…”

Introduction to the Douglass C. North memorial issue

“…North et al (2009) developed the concepts of 'limited access order' and 'open access order'. In the fourth essay, entitled 'Understanding the economics of limited access orders: Incentives, organizations and the chronology of developments', Bavel et al (2016) explore the 'limited access orders' that were prevalent in most of history and still endure in some parts of the world. They analyse the incentive structure of actors involved, using a formal model of the main interactions in a limited access order.…”