1.5 The Logic of the Transition from Natural States to Open Access Orders 25

set of organizations that are the primary agents in the process of creative destruction. This forms the basis for the civil society, with many groups capable of becoming politically active when their interests are threatened. Creative economic destruction produces a constantly shifting distribution of economic interests, making it difficult for political officials to solidify their advantage through rent-creation. Similarly, open access in politics results in creative political destruction through party competition. The opposition party has strong incentives to monitor the incumbent and to publicize attempts to subvert the constitution, open access in particular. While the opposition in natural state electoral systems may have similar incentives, the lack of open access and limits on competition weaken the ability of the opposition to counter an incumbent’s efforts in comparison to those in open access orders. Put simply, party competition works far better in the presence of open access than in its absence.

1.5 The Logic of the Transition from Natural States to Open Access Orders

The big question then is how natural states make the transition to open access societies. Two obstacles stand in the way of understanding the transition. First, the transition begins in the natural state and must therefore be consistent with natural state logic. However, if that is true how does the transition get started? An explanation of the transition must show how conditions arise within a natural state that are consistent with the logic of the natural state and simultaneously put elites in a position where it is in their interest to move toward impersonal intra-elite arrangements.

The second obstacle is explaining how intra-elite impersonal arrangements translate in open access orders into a larger share of society. One way of asking the question is, why would elites ever choose to give up their position in society and allow non-elites into full participation? Framing the question in this form is problematic: it carries the implications that elites are giving something up, and it is not clear that elites ever do that.30 We frame the question about the transition in a different way. Why do elites transform their unique and personal privileges into impersonal rights shared equally among elites? And how do elites secure their rights against each other? Creating credible protection for elite rights holds the promise of expanding

30This is the approach taken by Acemoglu and Robinson (2006), which stresses how elites, threatened by revolution or civil unrest, use institutions such as democracy to make credible commitments to non-elites.

26	The Conceptual Framework

output: for example, securing elite rights to form organizations directly produces more developed economies and polities. When elites create greater open access to political and economic organizations for themselves, they sometimes have incentives to expand access along several different margins into the non-elite population.

The transition, then, has two stages. First, a natural state must develop institutional arrangements that enable elites to create the possibility of impersonal intra-elite relationships. Second, the transition proper begins when the dominant coalition finds it in the interest of elites to expand impersonal exchange within the elite and institutionalize open elite access to organizations, effectively creating open access for elites. We call the conditions that may evolve in a natural state that enable impersonal relationships among elites the doorstep conditions. The doorstep conditions represent institutional and organizational support for increased impersonal exchange, as well as institutions consistent with the logic of the natural state that can be used in the transition to support open access orders.

The three doorstep conditions are:

Doorstep Condition 1. Rule of law for elites.

Doorstep Condition 2. Perpetually lived forms of public and private elite organizations, including the state itself.

Doorstep Condition 3. Consolidated political control of the military.

In combination, the doorstep conditions create an environment in which impersonal relations within the elite are possible. Rule of law for elites extends the range of contracts and relationships among elites and allows mutual dependency to exist that could not survive without some form of legal protection. Perpetually lived organizations create more powerful elite organizations that can undertake a wider range of economic and political activities than nonperpetually lived ones. Perpetually lived organizations also contain an irreducible element of impersonal identity. Consolidated control of the military removes the need for elites to maintain alliances among elite groups tied to military factions, which are activated in situations where violence breaks out. Impersonal elite organizations can utilize impersonal exchange by utilizing the identity of the perpetually lived organization rather than the personal identity of the organization’s members. Once elite relationships become impersonal relationships, new possibilities begin to open up. If a society on the doorstep creates and sustains new incentives for elites to successively open access within the elite, then a transition proper ensues. Nothing inevitably impels societies on the doorstep to make the transition.

1.6 A Note on Beliefs

27

In the transition proper, elites transform their personal privileges into impersonal rights. All elites are given the right to form organizations, whether those organizations are political, economic, or social. At that point, the logic holding the dominant coalition together has changed from the natural state logic of rent-creation through privileges to the open access logic of rent-erosion through entry. Elite factions find it profitable to allow wider access, but they also want to ensure that their rights are protected.

Historic transitions occurred within relatively brief periods, typically about fifty years. Britain, France, and the United States appear to have been on the doorstep in the late eighteenth century and made the transition to open access between 1800 and 1850, or in the case of France, by 1880. Although they have not completed the transition, both South Korea and Taiwan’s experience seems to parallel that of Europe, taking approximately fifty years. Some of the countries on the periphery of Europe have made a quicker transition, notably Spain after the death of longtime dictator Francisco Franco in 1975. All of these countries developed new economic and political institutions that secured open access for economic organizations through a general incorporation procedure; secured open access for political organizations through the development of articulated and competitive party organizations and broadening of suffrage; and secured open access to legal enforcement of rights through changes in their legal systems. These changes occurred within relatively narrow windows of historical time. Of course, the events leading up to these changes had taken centuries as the countries developed institutions, beliefs, and organizations that could sustain a transition.

1.6 A Note on Beliefs

All individuals form beliefs about the way the world works. Beliefs result directly from the nature of human consciousness in an uncertain world.31 People know they are alive, and they know that what they do now can affect what happens next, even if they do not know exactly what will happen next. As a result, people are consciously intentional. We are concerned with the subset of beliefs that we call causal beliefs, which concern the causal connections between actions and outcomes in the world around us.

Social scientists have only a limited understanding of what goes on inside of people – what motivates, pleases, angers, and scares them. We take these

31Hayek (1952) was one of the first social scientists to explore the implications of belief formation for human behavior.

28	The Conceptual Framework

individual and idiosyncratic features of individual preferences as given. Interests arise from the interaction of preferences, alternatives, and causal beliefs. When economists claim that individuals are rational and act in what they perceive to be their self-interest, hackles rise in the rest of the social sciences. What is in the perceived best interest of individuals is a complicated amalgam of their preferences over different outcomes, the alternatives that they face, and their beliefs about how their actions will affect the world around them. People are intentional; they are trying to accomplish the best outcomes with their limited resources and choices, but how they behave depends critically on how they believe the world around them actually works. Because the world is too complicated for human understanding to master fully, no belief system can be a completely accurate depiction of the world around us.

We do not answer the deeper question of where causal beliefs come from.32 The two main channels of belief formation are individual experience and education. Human beings are genetically programmed to learn in both ways. Human cultures, in part, are common information passed on through education, whether formal in the sense of classrooms or informal in the sense of parents and others teaching social norms to children. Neither way of forming beliefs is completely reliable, in part, because the beliefs we draw from experience are inaccurate models of the world around us.

Many beliefs about how other people will behave can be verified observationally, but they are not necessarily universally true: not all people behave in the same way.33 From an individual’s perspective, causal beliefs about those people with whom we interact repeatedly, beginning with the family, are more certain than beliefs about those with whom we have less interaction. At many points, beliefs about how people behave in the larger groups and aggregates shade into areas governed by knowledge from education, rather than experience, and from faith. Most causal beliefs about human behavior can, at least in principle, be confirmed or disconfirmed by experience in the set of social interactions, organizations, and networks in which individuals are embedded. The confidence that our causal beliefs are accurate – that they actually explain causal patterns in human behavior and can thus serve as a guide to intentional behavior – is a function of how close the beliefs fit our

32See North (2005) for an in-depth consideration of the problem of human cognition, belief formation, and integrating beliefs into economic models of social behavior.

33At another level, we also know that our beliefs about how other drivers behave are not universally true. In Britain they drive on the left side of the road. China has traffic laws completely incomprehensible to an American driver.