Money has always been something of an embarrassment to economic theory. Everyone agrees that it is important; indeed, much of macroeconomic policy discussion makes no sense without reference to money. Yet, for the most part, theory fails to provide a good account for it. Indeed in the...

This paper tries to explain why government bureaucraties are often associated with red tape, corruption and lack of incentives. The paper identifies two specific ingredients which together can provide an explanation - the fact that governments o ften act precisely in situations where markets...