Harbingers of dissolution? Grain prices, borders and nationalism in the Habsburg economy before the First World War

This paper explores the pre-First World War Austro-Hungarian economy as a prominent case where growing conflict between various ethnic and national groups within an empire might have contributed to the emergence of internal borders and even its eventual dissolution. To this end we adopt an Engel-and-Rogerstype approach to examine on an annual basis the extent of co-movements in grain prices across a sample of ten regional capital cities in the empire and over the period 1877-1910. There are two key findings. First, the political borders that emerged from 1918 onwards became visible in the price dynamics of grain markets already 20 years before the Great War. Second, this effect of a border before a border can be explained by the extent of language heterogeneity across the various parts of the Habsburg Empire. These results raise several important questions about both the forces that shaped pre-war market integration as well as the economic costs of breaking up the Habsburg customs union after 1918. --Border Effects,Grain Prices,Habsburg Empire,Market Integration,Nationalism,Pre-1914 Europe

Von Hayek's theory of cultural evolution in the light of a simplified model of Kaufmann's general biological evolutionary theory

In this paper, Hayek's theory of cultural evolution is compared to a simplified general macro-model of evolution based on Kaufmann (1993). It is shown how under certain condi-tions evolutionary lock-ins can occur, what consequences this has for the assessment of evolutionary results, and how lock-ins may be overcome. This last issue leads to three in-teresting results: the interdependency of orders matters, a purely macro-based model of evolution neglects population dynamics, and deliberately designed changes can be an important driving force for evolutionary development. The conclusion is that rule design combined with evolutionary selection may explain how group selection occurs, a point in-sufficiently addressed in Hayek's theory

Endogenous Borders? The Effects of New Borders on Trade in Central Europe 1885-1933

A large literature on “border effects” in the wake of McCallum (1995) documents the massive impact of borders on trade. However, all these studies suffer from an identification problem. “Border effects” are usually identified from cross-sectional variation alone. We do not know how trade would change in response to a change in borders – the “treatment effect” of borders on trade – simply because trade flows across “future” borders are typically not documented. Nor can we rule out that there is “reverse causation”: that borders run along pre-existing trade patterns rather than shape trade flows. We exploit a natural experiment from history to explore this issue: the many dramatic border changes that were imposed and codified by the peace treaties in 1919 across Europe. We follow Ritschl and Wolf (2008) and implement Ashenfelter’s difference-in-difference estimator in levels on a large, new data set on sub-national trade flows. This allows us to trace the effects of changing borders over time and produces two key results: first, new borders have a large effect on trade. However second, the “treatment effects” of borders tend to be significantly smaller than the pure cross-sectional effects. This is so, because most of the 1919 border changes followed a pattern of trade relations across the region that was clearly visible already before 1914. Borders shape trade, and trade shapes borders.border effects, treatment effects, European history

Intergenerational sharing of non-renewable resources: An experimental study using Rawls's Veil of Ignorance

[Introduction ...] The remainder of this paper is structured as follows: in section 2, we argue how a counterfactual “bargaining with future individuals” situation may be realized as an experimental setup. That way, we can test the behavior of real individuals in a setting which approximates Rawls’s Original Position in which people are ignorant to which generation they will belong. Section 3 first describes related intergenerational resource sharing experiments which all focus on the descriptive level. Then, we briefly explain Frohlich/Oppenheimer’ experimental approach for deriving intragenerational distributive norms in the lab. Our intermediate conclusion is that similar “intergenerational bargaining experiment” may contribute to the derivation of intergenerational distributive norms. Section 4 describes our own experimental design and the hypotheses we test. Section 5 presents our results; section 6 concludes

An intergenerational social contract for common resource usage: A reality-check for Harsanyi and Rawls

This paper investigates how one can derive fair allocation shares for renewable and non-renewable resources from a Rawlsian standpoint. Since there are competing interests over limited resources both within and between generations, it is argued that the respective trade-offs call for a more complete view of the conflict, taking both problems and their interrelation into account. The welfare economic solution of interand intra-generational sum of utilities maximization is rejected since it fails to prove that such optimum would be chosen by veiled stakeholders in a Rawlsian original position. The individual utility maximizing agent behind the veil is, deprived of knowledge in which generation she will be born and which income group she will part of inside a generation, confronted with a general trade-off: more resources to one generation may improve the lot also for low income individuals, but decrease utility for positions in other generations per se. While the risk neutral agent in Harsanyi's tradition is indifferent between solutions yielding all the same average utility from resource endowment, a realistic degree of risk aversion both concerning the intra- and intergenerational position shape the distributional choice necessarily towards more egalitarian solutions. A crucial factor determining one generation's share of the resource pie for a non-renewable resp. the utilization rate for a renewable resource is discounting. A discount rate of zero, as requested by Rawls, necessarily leads to strictly egalitarian intergenerational regimes independent of inter-generational risk aversion, while the distribution within a generation may be, depending on the intra-generational rate, rather unequal. The paper concludes with the observation that unequal intergenerational distributions among generations can only be justified given sufficient compensation for resource loss by building up a (public) capital stock

Economic Nationalism and Economic Integration: The Austro-Hungarian Empire in the Late Nineteenth Century

This paper seeks to reconcile two seemingly contradictory strands in the literature on economic development in the late nineteenth century Habsburg Empire - one emphasizing the centrifugal impact of rising intra-empire of nationalism, the other stressing significant improvements in market integration across the empire. We argue that the process of market integration was systematically asymmetric, shaped by intensifying intra-empire nationality conflicts. While grain markets in Austria-Hungary became overall more integrated over time, they also became systematically biased: regions with a similar ethno-linguistic composition of their population came to display significantly smaller price gaps between each other than regions with different compositions. The emergence and persistence of this differential integration cannot be explained by changes in infrastructure and transport costs, simple geographical features or asymmetric integration with neighbouring regions abroad. Instead, differential integration along ethno-linguistic lines was driven by the formation of ethno-linguistic networks. Finally, the analysis shows that the emerging pre-war regional integration patterns – shaped by nationalist sentiment – effectively anticipated the post-war settlement: the fault lines along which the Habsburg Empire was to break up eventually are evident in the price data about a quarter of a century or so before the outbreak of the First World War.Habsburg Empire, market integration, nationalism, networks, pre-1914 Europe

grain prices, borders and nationalism in the Habsburg economy before the First World War

This paper explores the pre-First World War Austro-Hungarian economy as a prominent case where growing conflict between various ethnic and national groups within an empire might have contributed to the emergence of internal borders and even its eventual dissolution. To this end we adopt an Engel-and- Rogers–type approach to examine on an annual basis the extent of co-movements in grain prices across a sample of ten regional capital cities in the empire and over the period 1877-1910. There are two key findings. First, the political borders that emerged from 1918 onwards became visible in the price dynamics of grain markets already 20 years before the Great War. Second, this effect of a “border before a border” can be explained by the extent of language heterogeneity across the various parts of the Habsburg Empire. These results raise several important questions about both the forces that shaped pre-war market integration as well as the economic costs of breaking up the Habsburg customs union after 1918

Harbingers of dissolution? Grain prices, borders and nationalism in the Habsburg economy before the First World War

This paper explores the pre-First World War Austro-Hungarian economy as a prominent case where growing conflict between various ethnic and national groups within an empire might have contributed to the emergence of internal borders and even its eventual dissolution. To this end we adopt an Engel-and-Rogers-type approach to examine on an annual basis the extent of co-movements in grain prices across a sample of ten regional capital cities in the empire and over the period 1877-1910. There are two key findings. First, the political borders that emerged from 1918 onwards became visible in the price dynamics of grain markets already 20 years before the Great War. Second, this effect of a 'border before a border' can be explained by the extent of language heterogeneity across the various parts of the Habsburg Empire. These results raise several important questions about both the forces that shaped pre-war market integration as well as the economic costs of breaking up the Habsburg customs union after 1918