Haber et al ask whether the truism that political instability means declining economic growth because of weak property rights holds true from the porfiriato to post-revolutionary Mexico (1876-1929). The answer, surprisingly, is not necessarily(!). Unstable governments have an incentive to create and enforce limited property rights, so as to have access to rents by which they can maintain their power. However, if the government goes too far and tries to create a form of limited government, it weakens itself such that less scrupulous usurping governments can enter the bargain and co-opt those rent-producing assets for their own purposes, usually to the detriment of the current administration...

This book is an outstanding analysis of real empirical evidence which turns the simple theory of instability=contraction on its head.

The deeper import herein is also that limited governments cannot provide an immediate exit from political instability. Machiavelli jumps out from behind the curtains wearing a sombrero! The current simplistic argument of many would-be politicos, that all developing nations need only create a limited government like the US to cure their economic ailments, is shown to be a straw man in this book.

Amazon Review (the dude abides)

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