Under anarchy, uncoordinated competitive theft by “roving bandits” destroys the incentive to invest and produce, leaving little for either the population or the bandits. Both can be better off if a bandit sets himself up as a dictator—a “stationary bandit” who monopolizes and rationalizes theft in the form of taxes. A secure autocrat has an encompassing interest in his domain that leads him to provide a peaceful order and other public goods that increase productivity. Whenever an autocrat expects a brief tenure, it pays him to confiscate those assets whose tax yield over his tenure is less than their total value. This incentive plus the inherent uncertainty of succession in dictatorships imply that autocracies will rarely have good economic performance for more than a generation. The conditions necessary for a lasting democracy are the same necessary for the security of property and contract rights that generates economic growth.

https://www.cambridge.org/core/services/aop-cambridge-core/content/view/S0003055400100838

Dictatorship, Democracy, and Development.

THE property rights theory of the firm suggests that public enterprises should perform less efficiently and less profitably than private enterprises. However, the existing empirical evidence actually provides weak support for this hypothesis. Most of the evidence is based upon North American "firms" and has compared the performance of matched public and private firms where at least one of the following limitations applies: (1) firms have a natural (spatial) monopoly (namely, electric and water utilities, nonrail transit, fire services, and refuse collection); (2) there is a regulated duopoly (for example, airlines, railroads, nonrail transit, financial institutions); or (3) output is not or cannot be priced by competitive forces (this applies to all of the above plus health-related services). Almost no empirical research has tested the effect of ownership in a competitive environment. In fact, with the exception of two studies that examine Indonesia and Tanzania,' no study has explicitly compared the effect of ownership while controlling for relevant factors.

Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises

China share issue privatization: the extent of its success☆

Consider the interests of the leader of a group of roving bandits in an anarchic environment. In such an environment, there is little incentive to invest or produce, and therefore not much to steal. If the bandit leader can seize and hold a given territory, it will pay him to limit the rate of his theft in that domain and to provide a peaceful order and other public goods. By making it clear that he will take only a given percentage of output — that is, by becoming a settled ruler with a given rate of tax theft — he leaves his victims with an incentive to produce. By providing a peaceful order and other public goods, he makes his subjects more productive. Out of the increase in output that results from limiting his rate of theft and from providing public goods, the bandit obtains more resources for his own purposes than from roving banditry.

The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force

This paper studies the relationship between health care expenditure (HCE) and age, using longitudinal rather than cross-sectional data. The econometric analysis of HCE in the last eight quarters of life of individuals who died during the period 1983-1992 indicates that HCE depends on remaining lifetime but not on calendar age, at least beyond 65+. The positive relationship between age and HCE observed in cross-sectional data may be caused by the simple fact that at age 80, for example, there are many more individuals living in their last 2 years than at age 65. The limited impact of age on HCE suggests that population ageing may contribute much less to future growth of the health care sector than claimed by most observers.

Ageing of population and health care expenditure: a red herring?

Arguments on Privatization Part I: Theoretical Background Part II: Positive Theory Part III: Normative Theory

Privatization: A Theoretical Treatment

The trend towards privatization has been particularly strong in the 1980s and 1990s. In the UK, some of the most important public utilities such as telecommunications, gas, and electricity have been privatized. Following unification, Germany is having to privatize an entire economy. This book examines the form of privatization, a topic which has not previously been subjected to rigorous economic analysis, and provides a comprehensive and thorough survey of arguments both for and against it. Both positive and welfare-economic approaches to deal with the complex problems of the transition from public to private ownership are discussed. The author also examines the central issues of privatization such as why efficiency increases can be expected as a result of privatization, whether full privatization coupled with subsequent regulation is better than partial privatization with the government regulating from within the firm. He also looks at the role of trade unions in the privatization process.

This paper presents a simple model of the ‘tax state’, where a progressive income tax is used to finance publicly supplied goods that are distributed free of charge. The individual citizens may be dissatisfied with such a fiscal system. If more than 50% are dissatisfied, we speak of a ‘crisis of the tax state’.

Crisis of the tax state

Public Enterprise Economics

This chapter presents the peak-load pricing problem. The problem involves goods for which demand fluctuates cyclically over time, both daily and seasonally. Electricity or gas demand peaks in the morning, at noon, and in the evening, and is highest in winter. In all these cases, it is impossible to use off-peak production to serve peak demand because the goods are not storable, at least not at reasonable costs. The supply side of such goods also has special features. The production typically is characterized by high fixed costs and low variable costs; there are many cases of increasing returns to scale. In practice, such public utilities are often required to meet all demand, however high it may be. The simplest rule of thumb in this peak-load case is based upon the distinction between operating and capacity costs; only consumers who are responsible for the capacity costs should pay for them. Therefore, peak demand pays operating along with capacity costs whereas off-peak demand pays the low operating costs only. This price structure is designed to encourage a more uniform utilization of capacity by reducing peak demand and increasing offpeak demand.

Dieter Bös

Papers

Privatization: A Theoretical Treatment

Privatization: A Theoretical Treatment

Crisis of the tax state

Public Enterprise Economics

Peak-Load Pricing