The Econophysics Blog

This blog is dedicated to exploring the application of quantiative tools from mathematics, physics, and other natural sciences to issues in finance, economics, and the social sciences. The focus of this blog will be on tools, methodology, and logic. This blog will also occasionally delve into philosophical issues surrounding quantitative finance and quantitative social science.

Friday, July 21, 2006

NY Times Op-Ed on Economics of War

Austan Goolsbee, an economist at the University of Chicago, wrote about the economics of war (both the international and the intranational varieties) in today's (July 20, 2006) New York Times: Count Ethnic Divisions, Not Bombs, to Tell if a Nation Will Recover From War. The following paragraph from the 'Economic Scene' column neatly summarizes the op-ed:
The good news is that history suggests that the destruction of war has no lasting impact on economic prospects. The bad news is that most of these countries, especially Iraq, are filled with ethnic divisions and civil discord. The evidence shows that these problems, unlike bombs, cause lasting damage to the prospects for a nation’s economy, even if they do not boil over into civil war.
Evidence for the "good news" comes from research done by Edward Miguel and Gerard Roland -- both of University of California, Berkeley -- The Long Run Impact of Bombing Vietnam. Evidence for the "bad news" comes from research done Alberto Alesina and Janina Matuszeski -- both of Harvard University -- and William Easterly -- of New York University -- Artificial States. The Artificial States paper is particularly interesting. The following is from the abstract of that paper:
Artificial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures how artificial states are. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other one measures how straight land borders are, under the assumption the straight land borders are more likely to be artificial. We then show that these two measures seem to be highly correlated with several measures of political and economic success.
This economics research is, sadly, very relevant to what we are seeing on the news everyday.

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