Prisoner’s Dilemma as a Tool to Analyze Tax-Farming Institutions

This chapter includes two different parts. First, it examines each chapter in brief. Secondly, a general discussion is given on why the institutional structure of the Ottoman Empire caused failures through presented arguments in previous chapters. The findings and arguments of this study have provided a contribution to the early modern Ottoman Empire in different ways. First, institutional change should be considered as a cause of long-run divergence in comparison with European societies. Secondly, the argument of the recent literature over coercive power of the central authority in contractual relations is inadequate in explaining the failure in contractual relations. If this argument is valid, then the prices of contracts would be in an increasing trend in the long term. The failure, in this sense, has emerged from the role of judicial/religious-based agents and their efforts to protect their interests within the institutional environment. Consequently, the divergence should be examined through economic institutions as well as non-economic institutions, particularly during the early modern period.

This chapter discusses the role of institutions and the rule of law in a historical context. The recent literature on the role of institutions argues that better economic performances emerged from welfare-enhancing institutions and efficient mechanisms during the pre-industrial period. This period is characterized by the domination of decentralized institutions in the economic structure of both Western European societies and the Ottoman Empire. The early modern period has also been characterized by contractual relations between the rulers (kings, lords, princes, sultans, etc.) and powerful groups. The cooperation among contracting parties has been a major driving force of economic progress. The theoretical background based on the rule of law context has included historical and institutional literature. This literature has been crucial to understanding how some societies solved credible commitment and the law enforcement problems and how others failed over time. Furthermore, the literature has presented how institutions did change over time. The theoretical background has shown that the Ottoman Empire developed institutions, and these institutions emerged for the same purpose under the rules of the game. We have shown that the institutional change that emerged in the Ottoman Empire is compatible with collective action theories.

The influence of political interests on resource discourse is well-documented, with ordinary citizens often portrayed as both victims and potential solutions if governments were more accountable. Institutions play crucial roles in shaping societal norms, behaviors and politico-economic interactions, yet the specific functions of different institutions and their impact on Civil Society Organizations (CSOs), especially Community-Based Organizations (CBOs), in rural contexts remain unclear. This paper explores how formal and informal institutions influence the activities, operational strategies and effectiveness of CSOs. Drawing upon recent developments in conservation, this understanding is particularly important in light of the evolving challenges faced by rural societies and the need for CBOs to navigate complex institutional landscapes to achieve their goals. Using the North, Wallis, and Weingast (NWW) theoretical framework, the paper distinguishes between 'limited access orders' and 'open access orders' to understand CBOs' operational contexts. In 'limited access orders', where power is concentrated among a few, formal institutions maintain the status quo, limiting CBO actions. The hypothesis posits that formal institutions, through regulatory frameworks, can either enable or constrain CBO activities, while informal institutions, through cultural norms, influence social acceptance, community support and resource mobilization for CBO initiatives. 'Open access orders' provide a conducive environment for mass opinions and collective actions led by CBOs on resource ownership. Understanding these dynamics is crucial for developing strategies that enhance government accountability and support CBOs' roles in advocacy, biodiversity preservation, natural resource management, and rural development.

The Weimar Republic is analysed within the concept of limited and open access orders. Before World War I, Imperial Germany had developed into a mature limited access order with rule of law and open economic access but lack of competition in politics. After World War I and inflation, Weimar Germany developed toward an open access order; open access was not, however, sustainable and collapsed in 1930–31. This case of a failed open access order suggests refining the framework of limited and open access orders in further work. It shows that the political process of “creative destruction” might result in dissolution of open access and that the political system needs the capacity of efficiently creating legitimacy in order to sustain openness. The failure of Weimar Germany also indicates that the international political system might work as a destabilizing factor of open access and that the nation-state perspective of the limited and open access order framework needs to be supplemented by an international perspective.

The Turkish Republic emerged onto the world stage as a secular and centralized nation state in the early 1920s from the remnants of the multi-ethnic, multi-religious and multi-lingual Ottoman Empir...

In the Shadow of Violence: A New Perspective on Development

A Beautiful Mend: A Game Theoretical Analysis of the Dormant Commerce Clause Doctrine

INTRODUCTION The success of game theory in the 1980s has revolutionized economics. In addition to optimization and competitive market equilibrium, the concept of Nash equilibrium became a basic analytical tool and a common language of economists in almost all fields. In his famed text book (1948), Paul Samuelson quoted an epigram: “You can make even a parrot into a learned economist; all it must learn are the two words, 'supply' and 'demand.'” But now the parrot needs two more words, “Nash equilibrium,” to be academically correct. As the game theoretic approach penetrated into many fields, however, some basic problems became apparent. First, it is not clear how players come to play a Nash equilibrium. Although Nash equilibrium was once perceived as the outcome of perfectly rational reasoning, active research in the past decade revealed that common knowledge of rationality only implies rationalizability, which is much weaker than Nash equilibrium. Second, game theoretic models quite often possess multiple equilibria which have markedly different properties. This is in contrast to the general equilibrium model where all equilibria are efficient. Hence in applications of game theory it is vital to pin down which equilibrium is selected. A host of refinements literature tried to solve this problem by defining a stronger notion of rationality than Nash equilibrium assumes, but it was not entirely successful. We are left with a number of new solution concepts, and there seems to be no clear consensus among economists as to which one is right.

INTRODUCTION The success of game theory in the 1980s has revolutionized economics. In addition to optimization and competitive market equilibrium, the concept of Nash equilibrium became a basic analytical tool and a common language of economists in almost all fields. In his famed text book (1948), Paul Samuelson quoted an epigram: “You can make even a parrot into a learned economist; all it must learn are the two words, 'supply' and 'demand.'” But now the parrot needs two more words, “Nash equilibrium,” to be academically correct. As the game theoretic approach penetrated into many fields, however, some basic problems became apparent. First, it is not clear how players come to play a Nash equilibrium. Although Nash equilibrium was once perceived as the outcome of perfectly rational reasoning, active research in the past decade revealed that common knowledge of rationality only implies rationalizability, which is much weaker than Nash equilibrium. Second, game theoretic models quite often possess multiple equilibria which have markedly different properties. This is in contrast to the general equilibrium model where all equilibria are efficient. Hence in applications of game theory it is vital to pin down which equilibrium is selected. A host of refinements literature tried to solve this problem by defining a stronger notion of rationality than Nash equilibrium assumes, but it was not entirely successful. We are left with a number of new solution concepts, and there seems to be no clear consensus among economists as to which one is right.

Heinrich Winkler’s two volume history of Germany in the nineteenth and twentieth century is titled Der lange Weg nach Westen. For him, ‘nach Westen’ means becoming a Western democracy, like England, France and the US. How did they do it? Douglass North, John Wallis, and Barry Weingast, in their book Violence and Social Orders: a Framework for Interpreting Recorded Human History (2009), take up the question of how countries make such a transition. The framework is that of limited and open access orders (LAO/OAO), as explained in Steven Webb’s article in this issue. Although they intend the framework for universal application, most of the North, Wallis, and Weingast book focuses on the economic and political history of England, the US, and France from early modern times up to the end of the nineteenth century—the times when these three countries became Western capitalist democracies as we think of them today. Violence and Social Orders does not discuss the twentieth and twenty-first centuries or the cases of Germany and Russia, the other big players in modern European history. The articles here apply the limited and OAO framework to the history of Germany in the nineteenth and twentieth centuries, for two purposes. First, they shed new light on the German political and economic history by looking through a comparative lens. Was Germany’s evolution so unique—a Sonderweg—or was it a later variant on similar themes? Second, the articles show how the framework needs augmenting to take account of an important case like that of Germany. For instance, in the late nineteenth and early twentieth century, while it was still a limited access order, the German economy was able to grow as fast or faster than the main OAO economies of the time and to surpass them on many technological frontiers, which is contrary to the prediction implicit in Violence and Social Orders. Also, the

The upper-income, advanced industrial countries of the world today all have market economies with open competition, competitive multi-party democratic political systems, and a secure government monopoly over violence. Such open access orders, however, are not the only norm and equilibrium type of society. The middle and low-income developing countries today, like all countries before about 1800, can be understood as limited access orders that maintain their equilibrium in a fundamentally different way. In limited access orders, the state does not have a secure monopoly on violence, and society organizes itself to control violence among the elite factions. A common feature of limited access orders is that political elites divide up control of the economy, each getting some share of the rents. Since outbreaks of violence reduce the rents, the elite factions have incentives to be peaceable most of the time. Adequate stability of the rents and thus of the social order requires limiting access and competition-hence a social order with a fundamentally different logic than the open access order. This paper lays out such a framework and explores some of its implications for the problems of development today

Economic competition by definition implies a choice between competing alternatives. But can economic agents always protect their rights to make this choice? In order to protect property rights, they should have a guarantor who imposes sanctions on the violator. However, the guarantor must be able to use violence, since the imposition of sanctions is often not voluntary. This paper shows that the uneven distribution of violence in society, which is not monopolized by one decision-making center and/or applied outside the rule of law, hinders economic competition. In such a situation, i.e. in a limited access social order, part of property rights remains unprotected, which prevents the entrepreneur from performing his/her function. The reason for this effect is the desire of the elite to maintain the status quo in distribution of rents: they try to avoid changes caused by the market process that may lead to a violation of existing political balance. In this study, the stated theses are confirmed on microdata of the BEEPS industrial enterprises survey by the European Bank for Reconstruction and Development - we test the hypotheses using stochastic frontier analysis (SFA) and discrete choice models. Empirical analysis allows us to argue that in the limited access order, the obstacle to participation in economic competition is a weak property rights protection - it forces firms to compete for limited resources not by satisfying the needs of consumers, but by following the interests of the property rights guarantor. The results of the study can be useful in developing competition policy measures and explaining the phenomenon of «regulatory bias» in antitrust policy of developing countries.

Vladimir Putin’s personal popularity creates the base for sociopolitical stability of regime. However, in the long term, the aspirations of Russia’s elite for national sovereignty will come to naught without anew economic development model. Applying the “limited access orders” framework of North, Wallis, and Weingast, this essay analyzes the interactions among three key groups in the ruling elite# the top federal bureaucracy, politically connected big business (oligarchs), and heads of security forces (siloviki). It considers the evolution of rent sources in Russia during the last 25 years and the incentives of elite groups. Itargues that under dominance of siloviki after 2012, the ruling coalition could not negotiate anew agreement on rent distribution, nor could it broaden access to economic opportunities and political activity for new social groups. Russia’s ruling elite missed the opportunity to avoid adeep shock that will likely destroy the existing “limited access order”.

The relationship between two members in a team is studied by using game theories and methods in this paper. The results show that each member's work amount, which is regarded as each member's decision variable, has a reasonable upper bound, the two members can achieve certain a Nash equilibrium, and may become "industrious" or "lazy" simultaneously while they are playing a non-cooperative game. On the other hand, with respect to certain a Nash equilibrium, the two members should raise or reduce their work amount simultaneously if they want to achieve the alliance optimization. Either certain a Nash equilibrium or the alliance optimization can be achieved by using an iterative algorithm. The study discovers the two members' relationship effectively, and the results are helpful to some real problems.

The Ottoman Empire stood at the crossroads of intercontinental trade for six centuries until World War I. For most of its existence, the economic institutions and policies of this agrarian empire were shaped according to the distribution of political power, cooperation, conflicts, and struggles between the state elites and the various other elites, including those in the provinces. The central bureaucracy managed to contain the many challenges it faced with its pragmatism and habit of negotiation to co-opt and incorporate into the state the social groups that rebelled against it. As long as the activities of the economic elites, landowners, merchants, the leading artisans, and the moneylenders contributed to the perpetuation of this social order, the state encouraged and supported them but did not welcome their rapid enrichment. The influence of these elites over economic matters, and more generally over the policies of the central government, remained limited. Cooperation and coordination among the provincial elites was also made more difficult by the fact that the empire covered a large geographical area, and the different ethnic groups and their elites did not always act together. Differences in government policies and the institutional environment between Western Europe and the Middle East remained limited until the early modern era. With the rise of the Atlantic trade, however, the merchants in northwestern European countries increased their economic and political power substantially. They were then able to induce their governments to defend and develop their commercial interests in the Middle East more forcefully. As they began to lag behind the European merchants even in their own region, it became even more difficult for the Ottoman merchants to provide input into their government’s trade policies or change the commercial or economic institutions in the direction they preferred. Key economic institutions of the traditional Ottoman order, such as state ownership of land, urban guilds, and selective interventionism, remained mostly intact until 1820. In the early part of the 19th century, the center, supported by the new technologies, embarked on an ambitious reform program and was able to reassert its power over the provinces. Centralization and reforms were accompanied by the opening of the economy to international trade and investment. Economic policies and institutional changes in the Ottoman Empire began to reflect the growing power of European states and companies during the 19th century.