ECONOMY

22 introduction: the reach of political economy
diverse preferences. Countries also need an effective military apparatus to protect
their wealth from predation by other countries. Success in these endeavors may lead
to immigration and geographical expansion, while failure to meet these goals may
lead to extensive emigration or break-up of a country (see Wittman 2000).
Bolton and Roland (1997) consider another modification of the model. Until now
we have assumed that the citizens are similar in all respects except for their preference
for public policy, which has been given exogenously. Suppose instead that individuals
differ in productivity and income, which determines their preference for redistributive
public policy. Suppose further that there are two sections of the country and
that each section votes by majority rule. Then two sections of a country may separate
because of significant productivity differences. All of this is reflective of Tiebout’s
(1956) argument that jurisdictions specialize to reflect the preferences and wealth of
their constituents. 26
To summarize, political economy is making use of its basic tools to investigate an
ever deepening set of questions. Ultimately, fewer institutions are treated as being
exogenously determined and more institutions, including the nation state, are treated
as variables to be explained. In this way, anthropology and history become part of
political economy.
We conclude this section on pushing the envelope with a final observation. As
the topics in this Handbook illustrate, the bulk of political economy research has
focused on institutions and behavior within advanced industrial democracies. In
these settings, the formal institutions of courts, legislatures, executives, bureaucracy,
and elections can all be taken as given. Hundreds, if not thousands of papers have
been written on these topics. Not surprisingly, the most progress has been made in
these areas.
In contrast, political economy work that studies phenomena in countries outside of
the advanced industrial democracies has made far less progress. Nevertheless, there
are a number of exciting developments. We briefly mention a few areas of nascent
research (posed as questions) that are likely to blossom in the future and that we
cover in the Handbook:
What do authoritarians maximize and why do they make the decisions they do?
In past, many scholars assumed that they maximize their share of rents (e.g.
North 1981, ch.3; Olson2001). Yet this approach remains inadequate because it
takes as given that the authoritarian remains in power, something deeply problematic
(as Tullock 1987 observed). Bueno de Mesquita et al. (2003; seeBueno
de Mesquita, this volume, for a summary) provide a new approach arguing
that authoritarians maximize their likelihood of staying in power. Haber (this
volume) provides a program for future research on this topic.
Why does democracy survive in some countries but not others? Przeworski (this
volume) argues against some common answers and suggests that per capita
wealth is an important reason.
²⁶ For an extensive discussion of the Tiebout hypothesis, see Wildasin (this volume). For ethnic
causes of division, see Fearon (this volume).