Media, Development, and Institutional Change

Media, Development, and Institutional Change

New Thinking in Political Economy series

Christopher J. Coyne and Peter T. Leeson

Media, Development, and Institutional Change investigates mass media’s profound ability to affect institutional change and economic development. The authors use the tools of economics to illuminate the media’s role in enabling and inhibiting political–economic reforms that promote development.

Chapter 2: The Reformers’ Dilemma

Christopher J. Coyne and Peter T. Leeson

Subjects: economics and finance, austrian economics, institutional economics


INTRODUCTION To analyze the role of media in economic development, we need to first understand the fundamental dilemma facing reformers. The policies and institutions required for economic development are well known. Writing over 250 years ago, Adam Smith noted that “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things” (1775: xliii). More recently, Dani Rodrik (2007: 21), echoing Smith, has noted that “A semblance of property rights, sound money, fiscal solvency, market-oriented incentives—these are elements common to all successful growth strategies.” Subsequent empirical research has supported Smith’s claim regarding the importance of economic freedom (that is, low barriers to entry and exit and minimal regulation and taxes), private property and the rule of law for economic progress (see for instance Scully 1988; Hanke and Walters 1997; Gwartney et al. 1999). Despite social scientists’ understanding of what economic development requires, we have a poor understanding of how to establish these policies and institutions where they do not already exist. Why do institutions conducive to economic development emerge in some countries but not others? Further, why do policymakers in some countries adopt policies that generate economic growth while others fail to do so? To explore these questions we develop a theoretical model that illuminates the fundamental dilemma facing reformers. Our model draws on some basic concepts from game theory to...

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