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The Political Economy of Italy's Decline$
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Andrea Lorenzo Capussela

Print publication date: 2018

Print ISBN-13: 9780198796992

Published to Oxford Scholarship Online: May 2018

DOI: 10.1093/oso/9780198796992.001.0001

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Vicious Circles and Multiple Equilibria: The Spiral

Vicious Circles and Multiple Equilibria: The Spiral

Chapter:
(p.63) 4 Vicious Circles and Multiple Equilibria: The Spiral
Source:
The Political Economy of Italy's Decline
Author(s):

Andrea Lorenzo Capussela

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198796992.003.0004

This chapter summarizes the theoretical framework of this book, and draws from it the lens through which the roots of Italy’s current decline are then retraced in its history. It exemplifies the main argument by discussing two alternative reactions to the insufficient provision of public goods: an opportunistic one—employing tax evasion, corruption, and clientelism as means to appropriate private goods—and one based on enforcing political accountability. It argues that from the perspective of ordinary citizens and firms such social dilemmas can typically be modelled as coordination games, which have multiple equilibria. Self-interested rationality can thus lead to a spiral, in which several vicious circles run in parallel, reinforce each other, and lead society onto an inefficient equilibrium characterized by low political accountability and weak rule of law. It concludes that in transition societies ideas, freer from the grip of the spiral, can exploit endogenous shocks to reverse it.

Keywords:   social dilemmas, multiple equilibria, vicious circles, rational choice, creative destruction, institutions, equilibrium shift, rule of law, political accountability, Italy

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