We provide a model of a primitive state whose rulers extort taxes for their own ends. This 'predatory' state can result in lower levels of both output and popular welfare than either organized banditry or anarchy. The predatory state may provide public goods, such as protection or irrigation,...

The welfare economic method for analyzing the case for government intervention is often criticised for ignoring the political determination of policies. The standard method of accounting for this critique studies the case for intervention under the constraint that the level of the instrument in...

We examine a recursive algorithm for learning steady states and cycles in stochastic nonlinear models. Necessary and sufficient conditions for local convergence are shown to be equivalent to easily computable expectational-stability conditions. These conditions are affected by the distribution...

We analyse the role of debt in persuading an entrepreneur to pay out cash flows, rather than to divert them. In the first part of the paper we study the optimal debt contract - specifically, the trade-off between the size of the loan and the repayment - under the assumption that some debt...