11 November 2010

The institutional framework of excludibility

Excludibility is either established legitimately, institutionally, or it is established illegitimately by raw power. That's where the resource curse kicks in. The resource curse is when the nature of a good is such that it alters the institutional framework of excludibility. As it pertains, for example, to oil the institutional framework is such that strongman rule siezes the natural resource and then expropriates it from belonging to the general population. In so doing the income from the trade in the natural resource accumulates in a sovereign fund and sustains the distortion in the debt markets rather than being distributed to the local population for it to be consumed in the development of the people's human capital. 

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