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April 28, 2006


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Eric Posner

Another way of putting this point is that natural resources are more vulnerable to expropriation by a foreign state than human capital is, so that if there are economies of scale in defense, size becomes less important as the economy shifts from natural resources to human capital. This suggests that states should become smaller rather than larger.


Thank you. Yes and no, I think. If protecting natural resources is the point of the state and these immobile resources become less important, then we should think that large powerful states are less important, and country size will shrink. On the other hand, my claim was that one reason for the small state in the first place was as a means of sharing a valuable resource among fewer people. If there is no resource to protect, then locals will be quicker to join larger states when these states can economize on other costs. This strikes me as the first order effect, and that is why I predicted a reversal of the current trend and a move to larger states. It may be especially so if larger states can have it both ways by accommodating federations, which can themselves satisfy heterogeneous tastes and, more to my mind, the gains from competition among jurisdictions. But I recognize that the point about federations confuses the prediction. One way or the other, I hope to add to the conventional literature with (1) the idea of protecting regional resources as an important historical factor and (2) the role of competition among states - although this is subject to te federation possibility.

Eric Posner

In terms of the Alesina/Spolaore model you rely on, the removal of a localize natural resource reduces both heterogeneity (implying larger state) and economies of scale (implying smaller state), so you are right that the effect is ambiguous. I'm not sure why one effect would be more important than the other, however.


I believe that it is important to recognize also that there are local political gains to be achieved by reducing the size of the state (in zero sum like situations) to expalin the actual situation. An example of this would be the independent movement in Galicia, where their GDP is much smaller than of the Basques or Catalans, and providing a local government is not likely to offset the benefits of participating of a bigger Spain.

Kimball Corson

Consider Iraq, because it is on our minds. The Shiites and Sunnis there are so busy at each others' throats and jockeying for position that the Kurds just might be able to succeed, keep their oil fields to themselves and become a viable nation. What then might emerge from what is left is more the question. A Mercedes for every Kurd, while the Shiites and Sunnis fight over, among other things, who should have been designated Caliph way back when.

Queuing on Eric Posner’s initial comment here, maybe we should stop fighting Sunni insurgents and go for the Kurdish oil fields. We might then come away with something more than our tail between our legs. Then too, we would have a geographic platform there from which to launch further escapades in the Middle East. Turkish imperialism, a la Nasser, would be checked and we could keep the Arab states sufficient roiled and baited with Western values to block a coherent offensives against Israel or America, all while breaking OPEC’s back and dropping the price of gas here to $1.50. We stole half of Mexico, decimated the native American population while swiping their turf, so what is wrong with going for a little crude and our 51st state.

Kimball Corson

A very contemporary or perhaps more interesting question on nation or country formation is what is to become of Europe with its present Muslim immigration. The analysis has serious implications for the present topic and too many Americans, and indeed Europeans, are oblivious to what is going on. Given Muslim immigration and differential fertility rates in Europe, experts such as Bernard Lewis, Bat Ye’or and others predict that before the turn of the century, Europe will be Islamic.

Although presently Muslims make up only about eight percent of Europe’s population (but 16% to 20% of its children), present immigration and differential fertility rates support this prediction. A popular Muslim T-shirt in Stockholm reads, “2030 – Then We Take Over.” Already, local imams in Denmark, France, Britain and Belgium are aggressively after national government officials to transfer sovereignty to Muslims in areas of Europe now occupied by them where Sharia law would then apply instead of national and local laws and where “foreigners” would not be welcome. “Eurabia” is the new coined term by Bat Ye’or and the title of her new book.

The West is asleep at the wheel. What was the title of that movie . . . Clueless.

Zachary Townsend

Despite being an undergraduate, I will pose a few questions:

What effects to you think the historical movement in agrarian technology has played on the size of nations? By this, I mean to say that historically you needed large swaths of land to produce the necessary food to support any large cities. This has become less true as technology has advanced.

What incentives do either individual or collective pride plays in the size of nations? Did Rome, for example, have an economic incentive to take over the Apennine Peninsula, or did nationalism play a role in that original expansion? What effect does that have on the long-range size of nations?

That leads into my last question, which is that when a nation reaches some critical size, what incentive does it have not to conquer small resource rich countries. Considering that possible outcome, what incentives do any nation have to stay small if they fear a larger nation?

The cyclical nature of nation consolidation and expansion is an interesting thesis; I look forward to further work on the topic.

Kimball Corson

Zachary, don't let being an undergrad slow you down. Chip in, as you will.

On your first point, with liberal international trade, the great swaths of land needed to produce the food necessary (as opposed to people for urbanization -- immigration) can be located in other countries. See Japan (but not for an immigration example). Therefore, food needs need not dictate size.

Secondly, I suspect there is a high correlation between strong nationalistic political sentiment and imperialistic expansion, especially if targeted areas are nearby and have valuable or needed resources. Saddam wanted Quait for its oil and its sea port for shipping oil, only we stopped him.

Finally, I suspect that, thinking of the Roman Empire, diseconomies of scale at the margin, reflecting an imbalance in incremental riches gained relative to additional defense, control and administration costs, may play a role as an upper boundary on expansion and therefore size. Consider the heavy hand (control costs) Saddam needed to keep the Shiites, Sunnis and Kurds all under one roof for as long as he did until we came along. As yet, it is not clear that we and/or the new Iraqi government can do that.

David Zaring

I won't be the first person to accuse an economist of presentism, but that will be the accusation, because this is an interesting project that has nothing to say about the "we feeling" that must be important to North Dakota (the world's third largest nuclear power) and Montana (let's assume that it could produce fifty percent of the world's copper, if you like, you could substitute the Transvaal and gold). Nor, while we're at it, could it explain China or India, the world's largest countries, one of which is ethnically diverse, the other with no natural resources in particular, and neither of which are in danger of invasion or a Nigeria-like compelling local succession movement. One could argue that "successful" federalism only exists in countries, regardless of their size, that have a particular kind of political economy, hang the resources, and the examples for this would be to compare Germany and Switzerland by population, one of which is immense and has regional sections of varying profitability, and the other of which is not. And both of which have occupied their present borders, more or less, for hundreds of years.


Thank you for the important, close-to-home examples. The insertion of natural resources into the theory, requires that it be examined over the very long run. In the short run, an internal region, like North Dakota or Oklahoma, is in no danger of invasion - except by taxation and regulation, and a political system that gives such states two senators apiece makes it as likely that they will be part of governing coalitions as that they will be exploited, if that's the word. I also need to think about how to define and deploy the concept of federation without making the theory circular or just-so. China can be seen as a kind of federation because of the substantial power and variety - and retention of wealth - at the provincial level.

David Zaring

Interesting about China - it may well have strong local control, along with a strong national culture - possibly it's more like the US than we would first imagine. So that may not be a good example of large-and-centralized, as you say. The theory doesn't have to explain everything, of course - but you may have to deal with a number of small-but-still-federal counterexamples. Good luck with the project - I'll look forward to seeing it develop.

Phillip Carey

Kimball's "Eurabian" predictions point to another variable in the equation, and that is the question and impact of the specific composition of the so called 'human capital' of any given region, state, federation, etc.

After all, if natural resources are acquiescing to human resources a greater share of the wealth-producing and success (read: unchallenged sovereignty)-predicting power, then it becomes increasingly important to look not just at the heterogeneity and homogeneity of the political and cultural 'tastes' of populations, but also at the effect such cultural, political and (of course) religious tastes have on the nature and competitive viability of such human resources.

One of the unfortunate trends in a number of countries within Europe--take the Netherlands, for example--is that as the Arab population grows (through immigration and asylum-seeking initially at the first-generational level, and then through higher levels of reproduction in succeeding generations relative to the 'native' European counterparts) its members' integration into local culture, programs, practices and services, etc. actually slows due to the local country's pre-Eurabian policies--policies not designed with such demographic trends in mind.

So, for example, the Dutch system of early and rigid path formation in elementary and secondary education (which relies heavily--even moreso than the US--on early childhood tests to predict probable success in certain educational tracks and future professions) ends up funnelling the vast majority of Arab immigrants' chidlren into lower-level educational tracks from which it becomes extraordinarily difficult, if not virtually impossible, to diverge. This ethnic segregation is one effect of cultural clashes (e.g. Arab women come from the mid-east to the Netherlands almost entirely uneducated, making them less active, if not in-active in their child's education; Dutch is not spoken in the home, making it difficult to carry schoolwork and lessons into homelife, etc.).

As these ethnically segregated school children perform worse on their predictive-tests, they are funnelled into lower-level education tracks that slowly but surely become more and more non-Dutch in terms of their participants, and then they are emptied out of the system into more labor-oriented rather than service-oriented professions.

Combine that with the disproportionate growth in the Arab sector of the population, and it is not hard to imagine a future Europe that is not only much more Muslim, but which has certain members states that are characterized by a surplus of labor-oriented human resources and a deficit of service-oriented human resources.

As natural resources become less important, however, so to do labor-oriented human resources.

How, then, would such demographic pressures on the nature of the human capital in any given region effect the size/soverignty/federation question at hand?

I am inclined to say that such a situation would predict an increase in the size of such a state, and/or its increased accession into a larger, more federalized cooperative, so that it could merge with a local neighbor rich in service-oriented human resources and poor in labor oriented human resources.

Human capital is, afterall, unique in that is is entirely moblie, unlike natural resources. So wouldn't the trend be to expand the region in which such mobile resources could move, migrate and be vied-for (e.g the EU) so as to allow for a heterogeneity of such resources throughout the greater region rather than a conglomeration of such resources in one sector thereof?

I think of the recent EU members from the eastern bloc, for example. Surpluses of lower-level skilled labor, deficits of higher-level service-oriented labor. One worry with the inclusion fo such states in the EU was that, free of migratory regulations, the inhabitants of such states would simply leave the east in droves and flood their more prosperous (German) neighbors with a surplus of such labor-oriented human capital. However, the flip side is that the eastern areas become open and hospitable to captialistic activity which inevitibly brings with it the service-oriented human capital that is becoming more important to the creation of wealth.

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