Money and Markets: Essays in Honor of Leland B. Yeager

226 Laurence S. Mosseconomics” that hypothesizes about measures of ethnic economic welfare dependingon racial origins, tribal affiliation, religious preference, ethnic identity, or evencultural predisposition. This may, indeed, be one element that makes the disciplineof economics different from closely related sciences such as political science,anthropology, and sociology (Casson 1991: 5). As a general rule, when an economistwrites about “nation,” he or she means an administrative region. 3 When asoci ologist or anthropologist writes about “nation,” he or she means a racial groupor tribal unit.The ethnic definition of “nation” separates the nation-state from territory andadministrative unit, and opens the door to secessionist movements by which apeople claiming common descent and culture adopt local leaders and joinnationalist parties (that is, ethnic parties) in an effort to partition territories, establishnew territorial governments, adopt new currencies, and in the extreme equip astanding army to conduct an independent foreign policy (Pfaff 1994). Thisburgeoning and often emotional side of nationalism is critically important tounderstanding how it could happen that “some two hundred nations . . . now makeup the United Nations [when] only a score or so, nearly all European or American,possessed national consciousness before 1914” (Pfaff 1994: 30). This phenomenon,still actively in progress and encouraged by international organizations such as theNobel Peace Prize Committee (New York Times 1996: A6), involves the alignment ofethnic emotions and romantic images based on some stylized (often blatantlyfictionalized) account of an ethnic group’s noble origins. 4Customized political historiography comes peppered with recitations ofatrocities committed by neighboring ethnic groups, and sensationalized accountsare considered by many to be a continuing source of ethnic distrust, conflict, andwar (Denitch 1994). It is an especially vivid part of the mental landscape in Easternand Central Europe, the Near East, the Middle East, Africa, and parts of China. Alltoo commonly we find one ethnic group demanding to secede from the nation-statein which it presently resides, partly to get revenge on the dominant population andpartly to start over without the legacy of a painful history.Alternatively, a dominant ethnic group within a state may demand on occasionthat another ethnic group residing in their territory pick up, abandon their homesand businesses, and leave. Either form of national self-consciousness, especiallywhen it is combined with violent rebellion, encourages other independent nationsto intervene in order to protect one ethnic group against the hostilities of another.The start of World War I is attributed to the assassination of the Austrian Archdukeby a Serbian nationalist. The Nazi quest for lebensraum and the protection ofGerman minorities in foreign states was motivated at least in part by these ethnicand racial concerns. Also, according to modern definitions, war begins when aforeign ethnic group enters territory claimed by another ethnic group to assist asecessionist movement underway (van Evera 1995).It has often been assumed by economists that ethnic feuding and the forces ofterritorial disassociation are blatantly inefficient because they “divert” moreresources from specialties based on comparative advantage than secession reorganizationcan ever hope to “create” (cf. Viner 1950). The European Community’s