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Research Themes

A fundamental challenge facing many developing societies is to reduce the central role of violence and its threat in shaping politics and economic under-performance. A common thread of my research is to understand the effectiveness of organizations and innovations that societies have developed to address the problem of violence in the past, and to seek new lessons for solving such political economy challenges in contemporary developing societies.

Swords into Bank Shares: Financial Solutions to the Threat of Political Violence

The failure to align the incentives of conflictual groups in favor of peaceful coexistence and socially beneficial policies is often seen as a major cause of persistent underdevelopment around the world. However, much less is known about strategies that have been successful at overcoming such political economy challenges. One approach that holds much promise, and in fact appears to have had some historical success, is the provision of financial assets that align the interests of winners and potential losers from reform by providing claims on the future.

This project analyzes the promise and limitations of financial instruments as a means for fostering broad political coalitions that favor peace and beneficial reforms.  It takes as a departure point the benchmark theory of portfolio choice, in which all agents hold the same (market) portfolio of risky assets. This may also align political incentives, as all individuals can gain from policies that improve the returns or lower the risks of the market portfolio, including risks stemming from political instability and conflict.  The project then analyzes a range of historical cases in which the introduction of financial assets have succeeded or failed at making politics less conflictual over time, focusing on three revolutionary states that subsequently led the world in economic growth: England, the early United States and Meiji Japan.  Next the project exploits a series of field experiments to test whether financial mechanisms can help raise support for peace in contemporary settings which face the threat of violence and polarization, including in Israel, the UK, and elsewhere. Finally, the project draws upon the theory, the historical cases and the field experiments to assess the promise and limitations of financial approaches in solving political economy challenges more generally.

Some key takeways of the project so far are that  well-designed financial market exposure can not only align political incentives, it can also provide a non-partisan and objective (albeit imperfect) metric for individuals to assess the impact of policies on the economy, a domain where all may benefit, and one over which no political party has a franchise.  As we show, designing interventions to help citizens learn-by-trading in financial markets can also empower citizens to make better financial decisions in their own lives, while providing a useful non-partisan gauge for how policies affect the common good.

These three benefits of well-designed financial market exposure: 1) sharing common gains and exposure, 2) sharing common metrics and 3) increased focus of attention on the common good, can be potent ways to reduce political polarization and conflict.

 

Here is a brief video where I discuss the Israel study, and another interview, with the Global Financial Literacy Excellence Center, where I discuss its implications for financial literacy and confidence. 

Related Coverage: The Washington Post, Stanford GSB Insights (Israel study), The Kalkalist (in Hebrew), The Financial Times, Stanford GSB Insights (Historical UK study) and an early Interview on the project.

Related Articles and Works in Progress

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"Unfinished Business": Harnessing International Trade for Inter-Ethnic Peace

Globalization, the discovery of natural resources and the development of international trade promise much to developing societies in the way of economic and political development but often deliver inter-ethnic conflict and the impoverishment of indigenous communities. This research project focuses on understanding the role of international trade in inter-ethnic violence and in shaping adversarial political coalitions, as well as the mechanisms through which trade can be harnessed to support peaceful co-existence, indigenous entrepreneurship and support for reforms.

In Trading for Peace, I examine the conditions under which trade can support peaceful coexistence and prosperity when particular ethnic groups are cheap targets of violence. A simple theoretical framework reveals that for a broad set of cases, while inter-ethnic competition generates incentives for violence, the presence of non-replicable, non-expropriable inter-ethnic complementarities become necessary to sustain peaceful coexistence over long time horizons. In addition to complementarity, two further conditions are important for deterring violence over time. When relatively mobile ethnic groups (eg immigrants) are vulnerable, a credible threat to leave can deter violence. When less mobile (indigenous) groups are vulnerable, high monitoring costs that allow them to withhold production can improve their gains from trade. I describe the implications for indigenous entrepreneurship and cultural assimilation, the development of local institutions supporting inter-ethnic trust, immigration policies and policies aimed at mitigating ethnic violence through financial innovations. I illustrate these implications using contemporary evidence and historical cases of organizations and institutions created to engender trade and support peace drawn from Africa, Asia, Europe and Latin America.  

Trade, Institutions, and Ethnic Tolerance: Evidence from South Asia provides evidence that the degree to which medieval Hindus and Muslims could provide complementary, non-replicable services and a mechanism to share the gains from exchange has resulted in a sustained legacy of ethnic tolerance in South Asian towns. Due to Muslim-specific advantages in Indian Ocean shipping, inter-ethnic complementarities were strongest in medieval trading ports, leading to the development of institutional mechanisms that further supported inter-ethnic exchange.

Using novel town-level data spanning South Asia's medieval and colonial history, I find that medieval ports, despite being more ethnically mixed, were five times less prone to Hindu-Muslim riots between 1850-1950, two centuries after Europeans disrupted Muslim overseas trade dominance and remained half as prone between 1950-1995. Household-level evidence suggests that these differences reflect local institutions that emerged to support inter-ethnic medieval trade, continue to influence modern occupational choices and organizations, and substitute for State political incentives in supporting inter-ethnic trust.

This paper was awarded the 2014 Michael Wallerstein Awardby the American Political Science Association for the best article published in political economy in the previous calendar year .

'Unfinished Business': Historic Complementarities, Political Competition and Ethnic Violence in Gujarat examines how the historical legacies of inter-ethnic complementarity and competition interact with contemporary electoral competition in shaping patterns of ethnic violence. Using local comparisons within Gujarat, a single Indian state known for both its non-violent local traditions and for widespread ethnic pogroms in 2002, I provide evidence that where political competition was focused upon towns where ethnic groups have historically competed, there was a rise in the propensity for ethnic rioting and increased electoral support for the incumbent party complicit in the violence. However, where political competition was focused in towns that historically enjoyed inter-ethnic complementarities, there were fewer ethnic riots, and these towns also voted against the incumbent. These historic legacies proved to be important predictors of the identity of the winner even in very close electoral races. I argue that these results reflect the role local inter-ethnic economic relations can play in altering the nature and the benefits of political campaigns that encourage ethnic violence.

 In Conquered But Not Vanquished: Complementarities and Indigenous Entrepreneurs in the Shadow of Violence (in progress), Alberto Diaz-Cayeros and I examine the fortunes of indigenous communities following arguably one of the most traumatic moments in history-- the Conquest of Mexico. Producers of cochineal dye--New Spain's most valuable processed good-  provided a complementary service that was both hard to replicate and to expropriate, due to its fragility and the embedded human capital involved in its production. We exploit micro-climatic variation in cochineal production in the growing season to trace the effects of cochineal production on pre-Columbian communities. We show that cochineal producing settlements were more likely to survive the Conquest, exhibited greater capital accumulation on the eve of the Revolution (1910), less support for the hegemonic party thereafter, and more small firm creation, greater benefits for women and the indigenous, its main producers, in 2010, 150 years after it was displaced by synthetic dyes. However, cochineal producing municipios show greater evidence of cultural assimilation as early as 1790, were more unequal in 2010, and were less likely to adopt highly redistributive indigenous political institutions (usos). We contrast the performance of these municipios with others producing valuable goods that were easy to expropriate, such as gold or silver, and or easy to replicate elsewhere, like cacao.  We interpret the effects as reflecting how robust inter-ethnic complementarity permitted the development of indigenous entrepreneurs despite the threat of violent expropriation.

In related work, my co-authors and I examine other effects of shocks to trading opportunities, both empirically, in the forging of a mass movement in favour of Indian independence and encouraging financial innovations that spread support for representative government in revolutionary England, and theoretically, in fostering social hierarchies that transcend ethnic divisions both in new markets today and in early human societies.

 

Some Related Coverage:   Stanford GSB Insights  and an Office Artifact.

Related Articles and Works in Progress (working titles)

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War and Freedoms (with Steven Wilkinson)

It is perhaps among the most influential theories of politics and development that shocks to the ability of non-elite groups to organize and credibly threaten violence are a fundamental driver of institutional and political change. The role of shocks to the organizational abilities of disenfranchised groups has long featured prominently in theories of democratization in Europe, broader political revolutions, as well as less dramatic shifts such as progressive taxation and changes in the identity of those in power.

We argue that wars provide a common environment where previously disenfranchised groups have historically gained and continue to be likely to gain the organizational skills to engage in private collective action to alter political institutions, particularly when external threats provide elites with little option but to allow such organizational skills to develop among non-elite groups. We explore the effects of veterans and conflict on radical institutional change and the strategies used to prevent disorder in post-conflict environments, drawing on natural experiments from post-Independence South Asia, the French Revolution, the Great Reform Act in England and other cases.

Related Articles and Works in Progress (working titles)

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Walking Together and Alone: How Peaceful Protests Fail and Can Yet Succeed in Remaking Our World (with Rikhil Bhavnani)

In this book, we walk in the footsteps of the pioneers of the nonviolent approach to provide a reinterpretation of the histories of the great movements of the twentieth century from a game theoretic perspective, bringing to bear a host of new quantitative analyses to understand the challenges they faced, when they were successful at overcoming them and why.

We develop a simple conceptual framework for understanding the strategies available to both the leaders and the followers of political movements, the media and outside audiences, as well as the regimes that they seek to influence, and how these decisions interact. We use this framework to highlight the presence of three key tensions that exist in many political movements.

These tensions include: those between the allure of violence and the seeming pedestrianism of nonviolence, between the need for numbers and the need for focus, and between organizations that depend on grassroots mobilization versus hierarchies and leadership

In light of the framework and new quantitative evidence, we then retrace and re-examine the decisions of the participants of the Indian Independence Movement in each of their three great nonviolent drives for change---the Non-Cooperation Movement of the 1920s, the Civil Disobedience Movement of the 1930s and the Quit India Movement of the 1940s---and how they succeeded or failed in addressing these tensions. At each step, we also discuss both grand strategy and the effectiveness of local tactics. We next compare the Indian experience with the movements that came after, including the Civil Rights Movement in the United States, the Arab Spring and recent protests around the world. Finally, we draw on what we have learned to suggest ideas for better implement nonviolent protests today.

In Gandhi’s Gift: Lessons for Peaceful Reform from India’s Struggle for Democracy, Rikhil Bhavnani and I provide an overview of our research in progress, exploring the potential and limitations of non-violent civil disobedience through the lens of the evolution of an iconic success: India's struggle for democratic self-rule. We present a theoretical framework that highlights two key twin challenges faced by non-violent movements in ethnically diverse countries. The first is the challenge of mass mobilization across ethnic lines. The second challenge lies in overcoming the enhanced temptations faced by members of large mobilized groups to turn violent, whether to secure short-term gains from mob action or in response to manipulation by agents who stand to gain from political violence. We show how these challenges appear to match general patterns from cross-campaign data.

Motivated by these patterns, we discuss how these challenges were overcome during the Indian Independence Struggle. We argue that the first challenge -- that of forging a mass movement -- was accomplished through the brokering of a deal that took advantage of external shocks -- in this case, the Great Depression -- to align the incentives of disparate ethnic and social groups towards mass mobilization in favour of democracy and land reform. The second key challenge -- that of keeping the mass movement peaceful -- was accomplished through organizational innovations introduced by Mohandas Gandhi in his reforms of the constitution of the Congress movement in 1919-20. These organizational innovations took the Congress movement from one dominated by a rich elite to one organized on the principle of self-sacrifice, selecting future leaders who could then be trusted to maintain non-violent discipline in pursuit of the extension of broad rights and public policy objectives. We conclude by arguing that a key, but hitherto mostly neglected, aspect of 'Gandhi's Gift' -- the example of non-violence applied to India's independence struggle -- lies in understanding these organizational innovations.

 

Related Coverage: Stanford Report

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The Political Economy of South Asia

Much of my published and on-going work relates to the Political Economy of South Asia.

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