A Cross-Country Analysis

THE IMPACT OF REGULATION ON ECONOMIC GROWTH IN DEVELOPING COUNTRIES: A CROSS-COUNTRY ANALYSIS 1 ABSTRACT The role of an effective regulatory regime in promoting economic growth and development has generated considerable interest among researchers and practitioners in recent years. In particular, building effective regulatory structures in developing countries is not simply an issue of the technical design of the most appropriate regulatory instruments, it is also concerned with the quality of supporting regulatory institutions and capacity.This paper explores the role of state regulation using an econometric model of the impact of regulation on growth. The results based on two different techniques of estimation suggest a strong causal link between regulatory quality and economic performance. Key words – economic growth; regulation; governance; developing countries; institutions. JEL classification: C23,I18, L33, L51, L98, O38, O50 2 Acknowledgement We would like to thank three referees for their perceptive comments on an earlier draft of this paper. The usual disclaimer applies. 3 1. INTRODUCTIONThe role of an effective regulatory regime in promoting economic growth and development has generated considerable interest among researchers and practitioners in recent years (e. g. World Bank, 2004). Regulation can take many forms and the form of regulation policy adopted in developing countries has shifted over time (Minogue, 2005). From the 1960s to the 1980s, market failure was used to legitimise direct government involvement in productive activities in developing countries, by promoting industrialisation through import substitution, investing directly in industry and agriculture, and by extending public ownership of enterprises.However, following the apparent success of market liberalisation programmes in some developed countries, and the evidence of the failure of state-led economic planning in developing ones (World Bank, 1995), the role of state regulati on was redefined and narrowed to that of ensuring an undistorted policy environment in which efficient markets could operate. Deregulation was widely adopted, often as part of structural adjustment programmes, with the aim of reducing the â€Å"regulatory burden† on the market economy.Privatisation and the more general process of economic liberalisation in developing countries have produced their own problems and failures and have resulted in the current focus on the regulatory state (Majone, 1994, 1997). The regulatory state model implies leaving production to the private sector where competitive markets work well and using government regulation where significant market failure exists (World Bank, 2001: 1).Arguably, however, the performance of the new regulatory state remains under researched, especially in the context of developing countries with their own peculiar economic and social problems and institutional characteristics. Building effective regulatory structures in de veloping countries is not simply an issue of the technical design of the regulatory instruments, it is also concerned 4 with the quality of supporting regulatory institutions and capacity (WorldBank, 2002: 152). Many of the institutions that support markets are publicly provided, and the effectiveness of these regulatory institutions will be an important determinant of how well markets function. The quality of regulatory governance will affect regulatory outcomes, which in turn can be expected to impact on economic growth. This paper explores the role of regulation in economic growth using an econometric model.More precisely, it assesses through econometric modelling the impact of variations in the quality of regulation on economic performance. Although earlier studies have looked at governance as a cause of cross-country productivity or income differences (Olson, et al. , 1998; Kauffman and Kraay, 2002), this paper differs in concentrating on regulation rather than wider governance issues. The results confirm that â€Å"good† regulation is associated with higher economic growth. The rest of the paper is organised as follows.Section 2 reviews issues in the literature pertinent to the debate on the role of regulation in economic growth, before turning to regulatory measures and proxies for the quality of regulation. In section 3 the models used are presented. Section 4 deals with a descriptive analysis of the data and reports the regression results. The results confirm that the quality of state regulation impacts positively on economic growth. development policy. Finally, section 5 provides conclusions and the implications for 5 2. LITERATURE REVIEW (a) Regulation TheoryThe theory of economic regulation developed from the nineteenth century and the literature is now vast (for recent reviews, see Laffont and Tirole, 1993, 2000; Levy and Spiller, 1994; Newbery, 1999). The case for economic regulation is premised on the existence of significant market failu re resulting from economies of scale and scope in production, from information imperfections in market transactions, from the existence of incomplete markets and externalities, and from resulting income and wealth distribution effects.It has been suggested that market failures may be more pronounced, and therefore the case for public regulation is stronger, in developing countries (Stiglitz 1998). More recent theoretical contributions to the regulation literature have provided a model of regulation for network industries that recognises the particular structural and institutional characteristics of developing countries and have highlighted the role of effective regulation in achieving equitable and sustainable expansion of infrastructure services in the poorer countries of the world (Laffont, 1999a; 2005).However, regulation of markets may not result in a welfare improvement as compared to the economic outcome under imperfect market conditions. In particular, information asymmetries can contribute to imperfect regulation. The regulator and the regulated can be expected to have different levels of information about such matters as costs, revenues and demand. The regulated agent holds the information that the regulator needs to regulate optimally and the regulator must establish rules and incentive mechanisms to coax this information from the private sector.Given that it is highly unlikely that the regulator will receive all of the information required to regulate optimally to maximise social welfare, the 6 results of regulation, in terms of outputs and prices remain â€Å"second best† to those of a competitive market, which centres attention on barriers to entry (Djankov et al. , 2002). Shapiro and Willig (1990) argue that state ownership provides more information to regulators than private ownership, so contracting should be less problematic when the state both owns and regulates.However, state ownership is associated with inadequate incentives to gathe r and use this information to maximise economic welfare (Hayek, 1945). In other words, there tends to be a trade off between state ownership reducing the information asymmetries and hence transaction costs of regulation and the relative incentives under state control and private ownership for agents to maximise economic efficiency (Grossman and Hart, 1986; Sappington and Stiglitz, 1987; Shapiro and Willig, 1990; Yarrow, 1999).Welfare-improving regulation assumes that the regulatory authority’s actions are motivated by the public interest. This has been criticised by public choice theorists who argue that individuals are essentially self-interested in or out of the public arena and it is necessary, therefore, to analyse the regulatory process as the product of relationships between different groups (Buchanan, 1972). This has been refined in the concept of â€Å"regulatory capture†, which involves the regulatory process becoming biased in favour of particular interests.I n the extreme case, the regulatory capture literature concludes that regulation always leads to socially sub-optimal outcomes because of â€Å"inefficient bargaining between interest groups over potential utility rents† (Newbery, 1999: 134; also, Laffont, 1999b). In the Chicago tradition of regulatory capture (Stigler, 1971; Peltzman, 1976), regulators are presumed to favour producer interests because of the concentration of regulatory benefits and diffusion of regulatory costs, which enhances the power of lobbying groups as rent seekers (Reagan, 1987). 7Regulation is also subject to â€Å"political capture†; indeed, political capture may be a much greater threat than capture by producer groups outside of the political system. Where political capture occurs, the regulatory goals are distorted to pursue political ends. Under political capture, regulation becomes a tool of self-interest within government or the ruling elite (Stiglitz, 1998). More generally, it is to be e xpected that both the process and outcomes of a regulatory regime will be determined by the specific institutional context of an economy, as reflected in its formal and informal rules of economic ransacting (North, 1990). By setting the â€Å"rules of the game†, institutions impact on economic development (World Bank, 2002; Rodrik et. al. , 2004). Economic development is seen not simply as a matter of amassing economic resources in the form of physical and human capital, but as a matter of â€Å"institution building† so as to reduce information imperfections, maximise economic incentives and reduce transaction costs. Included in this institution building are the laws and political and social rules and conventions that are the basis for successful market production and exchange.In particular, relevant modes of conduct in the context of the regulatory state might include probity in public administration, independence of the courts, low corruption and cronyism, and tradit ions of civic responsibility. â€Å"Institution building† including building a â€Å"good† regulatory regime is one of the most difficult problems facing developing countries and the transition economies at the present time (Kirkpatrick and Parker, 2004). (b) Regulatory Quality and Development OutcomesThe outcome of a regulatory system can be assessed against the yardsticks of effectiveness and efficiency. Effective regulation achieves the social welfare goals set down by the government for the regulatory authority. In developing countries, the social welfare objectives of regulation are likely to be not simply concerned with the pursuit of economic 8 efficiency but with wider goals to promote sustainable development and poverty reduction. Efficient regulation achieves the social welfare goals at minimum economic costs.The economic costs of regulation can take two broad forms: (1) the costs of directly administering the regulatory system, which are internalised within government and reflected in the budget appropriations of the regulatory bodies; and (2) the compliance costs of regulation, which are external to the regulatory agency and fall on consumers and producers in terms of the economic costs of conforming with the regulations and of avoiding and evading them (Guasch and Hahn, 1999). Regulatory quality can also be assessed in terms of the criteria for good governance. Parker (1999: 224) argues that a well-functioning regulatory system is one that balances accountability, transparency and consistency. Accountability requires the regulatory agencies to be accountable for the consequences of their actions, to operate within their legal powers, and to observe the rules of due process when arriving at their decisions (e. g. to ensure that proper consultation occurs). Transparency relates to regulatory decisions being reached in a way that is revealed to the interested parties.The third process which provides regulatory legitimacy is consistency. Inconsistent regulatory decisions undermine public confidence in a regulatory system. Inconsistency leads to uncertainty for investors, which raises the cost of capital and may seriously damage the willingness to invest. Since political intervention tends to undermine regulatory consistency, and politicians may be prone to alter the regulatory rules of the game for short-term political advantage, consistency is a primary argument for some kind of â€Å"independent† regulator.This discussion suggests that the capacity of the state to provide strong regulatory institutions will be an important determinant of how well markets perform. An economy with a 9 developed institutional capacity is more likely to be able to design and implement effective regulation, which should contribute to improved economic growth. Weaknesses in institutional capacity to deliver ‘good’ regulation may be predicted to affect adversely economic development (World Bank, 2002). Evidence on th e quality of regulation in developing countries is limited though growing.But where research has occurred, the evidence suggests that the results of state regulation have been disappointing. A recent study of 13 Asian countries found that 80% of regulators had no access to training and regulatory offices were usually understaffed. The report concludes: â€Å"Asia’s governments rely too much on under-equipped and unsupported independent regulators to carry out tasks that are beyond their capabilities† (Jacobs, 2004: 4). In Latin America there is often a lack of political support for independent regulation and a lack of commitment to maintaining regulatory independence (Ugaz, 2003).In the context of Africa, it was found that â€Å"regulation is being examined as part of individual sector initiatives, but these efforts are uncoordinated, and implementation is being left to follow privatization instead of being put in place concurrently† (Campbell-White and Bhatia, 1998: 5). A similar pattern of regulatory weaknesses can be discerned in the evidence for individual countries. In India, regulatory structures are associated with acute failures in institution building and with a bureaucratic approach that curtails enterprise (Lanyi, 2000).South Africa’s proliferation of regulatory bodies is associated with a lack of clarity about roles and responsibilities and with the adoption of policy-making roles independent of government (Schwella, 2002: 3). In Malawi, the electricity industry regulator remains closely connected to the state electricity industry, compromising any notion of real regulatory independence and encouraging capture. 2 In Sri Lanka, the policies governing the regulatory process are judged to have been ad hoc and based on short-term political interests, with deficiencies apparent at each stage of 10 the process (Knight-John, 2002).Experiences in the transitional economies also demonstrate much variability in the performance of the newly established regulatory institutions (Cave and Stern, 1998). In recognition that not all is well, the World Bank (2001: v) has stressed the importance of â€Å"improving regulatory regimes and building institutions and capacity effectively to supervise the private sector†. The Asian Development Bank (2000: 18) has also emphasised the need for improved regulation. Several papers have identified the causal effects of better governance on higher per capita incomes in the long run, using regressions with nstrumental variables on a cross-section of countries (Barro, 1997; Hall and Jones, 1999; Kauffman and Kraay, 2002). The causal chain between governance and economic outcome has also been examined. Some studies find that the quality of governance and institutions is important in explaining rates of investment, suggesting that one way in which better governance can improve economic performance is by improving the climate for capital creation (World Bank, 2003; Kirkpatrick , Parker and Zhang, forthcoming,). Olson et al. 1998) find that productivity growth is higher in countries with better institutions and quality of governance. Kauffman and Kraay (2002) reinforce these findings, relating the quality of governance to economic outcomes using a data set covering 175 countries for the period 2000-01. (c) Measures of Regulatory Governance The literature suggests, therefore, that the ability of the state to provide effective regulatory institutions will be an important determinant of how an economy performs. The major variable of interest is the quality of regulation.Other researchers have operationalised the 11 broader concept of governance using two different groups of variables. The International Country Risk Guide (ICRG) data set is produced annually and covers three aspects of government – bureaucratic quality, law and order and corruption (Political Risk Services, 2002). Each variable is measured on a points scale with higher points denoting b etter performance with respect to the variable concerned. The assessment is based on expert analysis from an international network and is subject to peer review.The ICRG variables have been used as proxies for the quality of governance in research (Neumayer, 2002; Olson et al. , 1998). The second set of governance variables comprises a set of six aggregate indicators developed by the World Bank and drawn from 194 different measures (Kauffman, Kraay and Mastruzzi 2005). These indicators are based on several different sources (including international organisations, political and business risk rating agencies, think tanks and non-governmental bodies) and a linear unobserved components model is used to aggregate these various sources into one aggregate indicator. The indicators are normalised with higher values denoting better governance. The six indicators provide a subjective assessment of the following aspects of a country’s quality of governance: Voice and accountability: res pect for political rights and civil liberties, public participation in the process of electing policy makers, independence of media, accountability and transparency of government decisions. Political instability: political and social tension and unrest, instability of government.Government effectiveness: perceptions of the quality of public provision, quality of bureaucracy, competence of civil servants and their independence from political pressure, and the credibility of government decisions. 12 Regulatory quality: burden on business via quantitative regulations, price controls and other interventions in the economy. Rule of law: respect for law and order, predictability and effectiveness of the judiciary system, enforceability of contracts. Control of corruption: perceptions of the exercise of public power for private gain.The focus of this study is on regulation rather than governance. We therefore use the two variables in the World Bank data set that come closest to capturing t he quality of the outcome and process dimensions of regulation, namely the regulatory quality and government effectiveness indices. The regulatory quality index measures the regulatory burden on business associated with inefficient quantitative controls and can be taken as a proxy for the quality of the outcomes of applying regulatory instruments. The government effectiveness index measures the quality of ublic provision, competence of civil servants and the credibility of government decisions, and can therefore act as a proxy for the process dimensions (consistency, accountability, transparency) of regulatory governance. The objective of the empirical analysis reported below, in section 3, is to test for a causal link between regulation quality and economic performance. The approach is to adopt a growth accounting framework, where economic growth is used as the measure of economic performance and regulation is entered as an input in the production function.Neoclassical growth model ling began with the work of Solow (1956), who employed a neoclassical production function to explain economic growth in the USA during the first half of the twentieth century. Important assumptions of this approach are constant returns to scale and diminishing returns to investment, which imply that for a given rate of saving and 13 population growth economies move towards their steady-state growth path. This can be extended to differences in income levels between countries, to argue that in the long run income per capita levels will converge.A lack of empirical support for convergence and the presence of a large, unexplained â€Å"residual† factor in the function estimates have presented a major challenge to these models. The endogenous growth theory put forward by Romer (1986) and Lucas (1988) led to renewed interest in economic growth analysis. An important advantage of endogenous over traditional growth models is that, through the assumption of constant or increasing retu rns to a factor input, in particular human capital, it is possible to explain a lack of growth and income convergence between countries and to account more fully for the residual factor in Solow-type analyses.The â€Å"growth accounting† exercises, popularised by Barro and others (Barro, 1991, 2000; Barro and Sala-i-Martin, 1992), fall within the generalised Solow-type growth model. An important characteristic of this Most empirical approach is the inclusion of various indicators of economic structure. research using this approach has found evidence of â€Å"conditional† convergence, where convergence is conditional on the level or availability of complementary forms of investment, including human capital and a supportive policy environment.This suggests that the failure of developing countries to converge on the income levels of developed countries may be attributed, at least in part, to institutional factors. 4 The importance of institutional capacity for the design and implementation of effective economic policy has been demonstrated in various empirical studies of cross-country growth, for example Sachs and Warner (1995) and Barro (2000). A similar approach is adopted in this study to examine the role of regulatory institutional capacity in accounting for cross-country variations in economic growth.An issue that needed to be addressed at the outset is causality. It could be argued that instead of regulatory quality determining economic growth, regulatory quality could be determined 14 by the economy’s growth rate. Economies that grow faster are able to generate higher levels of income and are therefore able to support the development of better institutions. Or, alternatively, there may be a level of simultaneity, in the sense that institutional quality generates more sustained economic growth, which in turn supports more and better regulatory institutions.The Granger causality test is commonly used in empirical work to establish the di rection of causation. However, this test is sensitive to the length of lags of the variables used and therefore requires a relatively long time series dimension to be able to select the right length of lag and to be relatively confident about the conclusion drawn. Since the time dimension of our regulation data is limited, we are unable to apply the Granger causality test.Fortunately, there is a substantial literature that indicates that better governance leads to higher income rather than causation being in the opposite direction (Olson et al 1998; Acemoglu et al 2000; Rodrik et al 2004). Kauffman et al (2005: 38) implement an empirical procedure for testing for causation, which leads to the identification of strong positive causal effects running from better governance to higher per capita incomes and suggest that a one standard deviation improvement in governance leads to a two- to three-fold difference in income levels in the long run. The authors state, ‘Some observers ha ve argued that †¦.. here is a strong causal impact of income on governance. However, we argue that the existing evidence does not support a strong causal channel operating in this direction – most of the correlation between governance and per capita income reflects causation from the former to the latter’ (Kauffman et al 2005, p3). They conclude: â€Å"available evidence suggests that the causal impact of incomes on governance is small. Rather, the observed correlation between governance and per capita incomes primarily reflects causation in the other direction: better governance raises per capita incomes†.However, we accept that because we are unable to rigorously demonstrate causation in our modelling, the results should be read with this caveat. 15 Endogeneity is another issue that should be addressed. To cope with the possible problem of endogeneity, a 2SLS or IV technique can be used. But to to do this effectively requires good sets of instruments for the variables that potentially could suffer from this problem, including lags of the variables concerned. Once again, data availability, particularly relating to the regulatory proxies, does not permit an effective test for endogeneity.We accept that this remains a weakness. 3. THE MODELLING The approach used in the modelling is to assume that each country’s production possibility set, in common with most literature in this area, is described by a Cobb-Douglas production function: Yit Ait K it Lit (1) where Y is the output level; A, level of productivity; K, stock of capital; and L, stock of labour – ‘i’ and ‘t’ stand for country and time respectively. Assuming that the production function exhibits constant return to scale with respect to physical inputs, (2) can be written in per capita terms as: yitAit k it (2) where lower case letters refer to per capita units. Assume a simple Keynesian capital accumulation rule according to the following s pecification: 16 dk / dt sy (n )k (3) where dk/dt is the rate of change of the per capita capital stock, which is assumed to be equal to the flow of saving (equal to investment) minus capital depreciation and the growth of the labour force. In this equation s is the share of gross saving in output per capita, is the depreciation of capital and n the rate of growth of population as a proxy for the growth of the labour force.Setting (3) equal to zero gives us the steady state solution for the stock of per capita capital; k=sy/(n+ ). Taking the logarithm of both sides of equation (2) and replacing the steady state solution for k from above into (2) gives the steady state solution for output per capita, which is as follows: * ln ( yit ) [1/(1 )][ln Ait ln ( sit /(nit it )] (4) Where (*) above the variable signifies the steady state solution. We adopt the Mankiw et al. (1992) assumption that economies move towards their steady state solution according to the following approximation: n yi t lnyi 0 * (lnyit lnyi 0 ) (5) where y0 stands for the initial level of per capita income, and (1 e t ) is the adjustment dynamic towards steady state, where ‘ ‘ is the speed of convergence. From (5) we can solve for the growth of per capita output, which is as follows: 17 git * ( / t ) (lnyit lnyi 0 ) (6) * Replacing ( lnyit ) by its equivalent from (4), gives us a relationship for actual growth of per capita output: git ( / t (1 ))[ln Ait ln( sit /( nit it )] ( / t )lnyi 0 (7) Total factor productivity plays an important role in growth. We assume that ts dynamic takes the following form: Ait Ai 0 e it (8) Where Ai0 specifies the initial level of productivity and ‘ ’ its rate of efficiency growth per period. Substituting for A from (8) into (7), per capita growth of output (g) is represented by the following relationship: g 1 ln Ai 0 2 i 3 ln( sit /(nit it )) 4 lnyi 0 (9) where 1 / t (1 ), 2 /(1 ), 3 / t (1 ), and 4 / t. Adding some control and qualitative variables as well as a stochastic term to (9) provides the model which we use to assess the role that regulatory quality plays in economic growth. 18Variables added to equation (9) broadly follow the growth empirics literature, such as Barro (1991, 2000), Mankiw et al. (1992) and Islam (1995). Amongst the control variables included in most empirical research are initial conditions, both in terms of the level of development (as proxied by GDP per capita) as well as human capital and institutions. Most also include proxies for the macroeconomic environment such as inflation, trade openness and the government’s involvement in economic activities. Qualitative variables can also be added to account for specific events in a country, as well as data heterogeneity when panel data are used.In our analysis, depending on the nature of data set constructed, we make use of all or some of these variables with the aim of ensuring that our regressions are appropriately specified. In the cont ext of our specification in (9), similar to Temple and Johnson (1995), we make the additional assumption, drawing on the literature relating to regulation in developing countries reviewed earlier, that the rate of efficiency growth ’ ’ directly varies with the quality of regulatory institutions in the country.Those countries with good institutions in place can design and implement policies that allow them to continue with their future growth. If instead the country in question lacks or has a weak institutional structure, its growth potential is likely to be diminished because the design and implementation of appropriate policies are then adversely affected. In the case of developing countries, in particular, to be able to benefit from being a latecomer in terms of industrialisation and grow at a high speed to â€Å"catch up†, it is important that institutional supports are present to realise the potential for income convergence.One of the control variables that is likely to be important in this context, is initial institutional quality. In the absence of better information about the initial institutional quality, we adopted 19 educational attainment as a proxy variable. At first reading this may seem an unusual choice, but our proxy, secondary school enrolment, is correlated with the regulatory governance variables we are using (see Table 1 below) and it has been successfully used as a proxy in other studies. 5 The finding that education is highly correlated with our regulatory variables is an nteresting finding in itself and one worthy of exploration in future research. We apply two methods of estimation to the model specified by equation (9). One is based on cross-section analysis, in which we attempt to measure directly any possible impact that regulation has on economic growth. The second is based on panel data, in which we indirectly estimate the growth contribution of regulation. The reason for applying different estimation procedure s is due to our data on the indexes of regulation; we have a few observations per country.Therefore, for the cross-section regression we average the relevant data over the period 1980-1999 and combine the result with the regulation data. 6 This allows a direct measure of the possible role that regulation plays in growth, using equation (9) as a base to estimate 2 . In the second method we adopt a variant of the one applied by Olson et al. (1998) and apply the fixed effects technique7 to the panel data constructed. This data set combines cross-section and time-series data for the countries included in the first data set.This procedure, which essentially involves including a dummy for every country in the estimated equation, produces consistent estimates even where data are not available for some time-invariant factors that affect growth. The fixed effects estimator does require, however, that each included variable varies significantly within countries. Clearly, even if available, th e regulatory variables may not satisfy this requirement since institutions usually change slowly. The estimation procedure, therefore, involves two stages. We first regress GDP per capita growth in each country per period, git on ln ( sit /(nit it it ) plus a set of country dummies. The coefficient on the country dummies reflects the effect on growth of all the 20 time-invariant variables, including regulatory institutions. In the second stage we use the coefficients of the country dummies as the dependent variable and regress them on the measures of regulatory quality and control variables. The coefficients on the measures of regulatory quality in the second stage regression reflect the impact of regulation on GDP per capita growth after controlling for capital accumulation and certain other variables. 4. THE DATA AND THE REGRESSION RESULTSData for the regulatory quality measures were set out in Kauffman et al (2005) and are available for downloading from the World Bank web site. 8 As discussed earlier, the two regulation indicators used from this study are regulatory quality and government effectiveness measures. Other data required for the regression analysis were taken from the World Bank’s World Development Indicators. The data set used in the analysis covers 117 countries for the cross-section regression and 96 for the panel version of the regression (for a full list of the countries see the Appendix).Although the main focus of the study is the impact of regulation on economic performance in developing countries, a heterogeneous data set was used including some transitional and advanced countries as well as developing ones. The reason for including some nondeveloping countries was to improve the statistical reliability of the results by including more countries, with regional dummies used to capture the differing levels of economic development. However, as a cross-check on our results we repeated our analysis removing the developed countries from the data base. The results were substantially unaffected (these results can e obtained from the authors). As information on regulatory governance is only 21 based on one year, in the cross-section model, all other variables were converted into one period by averaging for 1980-2000. Initial effect variables relate to 1980. For the panel version, the data cover the period 1980-2000 (in common with most empirical research in this area, and in order to remove short-term disturbances as well as business cycle effects from the data, we have converted the time series data for the variables into 5-year period averages covering 1980-84, 1985-89, 1990-94 and 1995-99).However, the time series dimension is not complete for a number of the countries in the data set and therefore the panel data are unbalanced, containing 432 observations. Table 1 provides the correlation coefficient matrix for the key variables used in the study. (Table 1) The first data column in Table 1 shows the simple correla tion coefficients between the dependent variable, GDP growth per capita, and possible explanatory variables. The correlation coefficients have the expected signs.The correlation coefficients between the indicators of regulatory governance, namely government effectiveness and regulatory quality, and GDP per capita growth have the expected positive sign. The bivariate correlations between inflation and the regulatory proxies used are negative, supporting the proposition that economies with better regulatory governance are also better able to design macroeconomic policies that stabilise the economy and control inflation.There is also a high correlation between the logarithm of initial GDP per capita and initial secondary school education, both of which are in turn correlated with the various proxies for regulatory governance. 9 This suggests that, included in the same regression, parameter estimates for these variables may not be individually reliable, due to multicolinearity. This is also the case with the two regulatory proxies that we intend to use in the analysis, namely government 22 effectiveness (GE) and regulatory quality (RQ). These two are highly correlated and herefore cannot be included in the same regression in order to estimate each variable's contribution. For this reason we considered first the contribution of each of these proxies to growth in separate regressions, and then combined them by addition to form a composite regulation variable (RQGE). Before formal analysis of the model specified in (9), we checked for the possibility of convergence in our data. In general, the literature does not support unconditional convergence (Barro, 2000; Mankiw et al. , 1992; Islam, 1995) but instead finds evidence of conditional convergence. We investigated this issue using regulatory governance as a ossible pre-condition for convergence. Table 2 presents the results. There is no indication of unconditional convergence (Reg. 1 and 2), the sign on the initial G DP per capita variable (LIGDPPC) is positive. However, once an indicator of governance is included (RQ, GE and RQGE), as in Reg. 3 to 5, there is an indication of conditional convergence in the form of a negative sign. Differences between growth experiences of countries are partly explained by their state of regulatory quality. There is no indication that there is any significant regional difference in this context (cf. reg. -8, which include regional variables for Africa, Asia and Latin America). (Table 2 here) In addition to combining the two regulatory proxies (RQ and GE), and in the light of high correlation between the two, the first principal component of these two was generated (PCRQGE) and this composite index was used as a regulatory proxy. Results generated based on this proxy, as indicated by Reg 5a in table 2, are the same as those reported using 23 RQ, GE and RQGE10. We repeated this process taking into account the other four indicators of governance identified by Kauff man et al (2005) and detailed earlier.The first principal component of all the six indicators of governance (termed PC All) was generated, as well as one based on the four, excluding RQ and GE – termed PC Others. Reg 5b and Reg 5c in Table 2 include the results based on these composite indexes. Inclusion of the four indicators of governance alongside or instead of the two regulatory proxies combined (RQGE) and its principal component (PCRQGE) has a marginal effect on the parameter estimates for the other variables in the regression, but the signs remain the same. The coefficient values for PC All and PC Others are, however, lower than for the other regulation variables.We interpret this result as being an indication of the differential influence of different governance proxies on growth. In other words, a possible criticism of our findings that various measures on institutional quality could be highly correlated and that it is institutional quality rather than the quality of regulation in particular that matters is not borne out. More precisely, the regulation proxies we have used (RQ, GE, RQGE and PCRQGE) seem to have a higher impact on growth than the other four indicators of governance identified by Kauffman et al (2005) reflecting wider institutional factors.Therefore, regulation rather than governance issues more generally seems to have the larger impact on growth. 11 Having considered the issue of convergence and considered the possible relative effects of regulation and governance issues more generally on growth, Tables 3 and 4 report results based on the formal analysis of the data. The results address the main focus of the research, the impact of regulation on the growth in GDP per capita. The results reported in Table 3 are based on the model specified in equation (9) using OLS and cross-country data, as detailed above.Table 3 reports ten regressions, each containing different combinations of the independent variables in our data set. The econ omic variables in the full set of regressions 24 tested included the variables derived from the model itself, as specified in equation (9), and measures for general inflation, trade, government expenditure, as well as the regional dummies. However, with the exception of inflation these other variables proved to be statistically insignificant at the 10% level or better and therefore, to economise on space, the results are not reported.The inflation variable was found to be statistically significant and negative, suggesting that unstable macroeconomic conditions have a negative effect on economic growth. (Table 3 here) The regional dummies were used to test the hypothesis that different regions may have characteristics that affect growth differently. This is validated with respect to Asia, confirming that this region had, on average, performed better with respect to economic growth than other regions in the period studied. A dummy for Africa and Latin America were found to be statisti cally insignificant. We also included the initial level of human apital, as measured be secondary school enrolments, as a proxy for the initial level of â€Å"institutions†. As indicated in Table 1 this variable is highly correlated with initial GDP per capita, and the results in Table 3 confirmed that it has a negative sign and is statistically significant. This result supports the conditional convergence hypothesis. The regulatory variables are correctly signed and statistically significant in all cases. The sign and level of significance of the parameter estimates for these regulatory proxies indicate that they have a statistically significant and positive effect on economic growth.Based on the estimates for the combined regulatory variable (RQGE), a unit change in the quality and effectiveness of regulation is, on average, associated with approximately an 0. 6% to 0. 9% 25 increase in economic growth, everything else remaining equal. As with the other results reported, th e regulatory proxies used here seem to have a larger impact on growth than do the other governance proxies, namely the variables PC All and PC Others. One objection to our analysis so far is that we have used regulatory data for 2000 only. Perhaps the regulatory environment has changed substantially during the period 1980-2000.Unfortunately, World Bank regulatory data do not exist prior to 1996. But as a cross-check on the stability of the results if regulatory data for other years from 1996 are used, we first considered the correlation between the World Bank regulatory indicators between 1996 and 2000. The results gave correlation coefficients of 0. 92 to 0. 99 confirming a high degree of stability. Nevertheless, we then re-ran our regression reported in Table 3 using regulatory indicators (constructed as before) but for 1996, 1998 and 2000 separately. The results were almost identical.As discussed earlier, the stability in the governance variables plus the very limited observation s on governance (a maximum of two for each country) caused us to rule out the use of regressions based on panel data. (Table 4 here) Table 4 reports results based on the second method of estimation, which, as discussed earlier, involves two stages. In the first stage, by applying a fixed effect technique to the panel data, we arrive at the following regression results: GDP per capita = 0. 133 Log net12 gross capital formation – 0. 148 Log initial GDPPC (6. 41)* (6. 57)* 26 +0. 4 Log net schooling + Country Dummies (1. 84)** Adjusted R2 =0. 21; number of observations=432 The figure in brackets is the t-ratio; * (**) indicates significance level at 5% (10%). From the above, the regression parameter estimate associated with the country dummies is saved and used as the dependent variable in the regressions reported in Table 4. For reasons of space we report only a sub-set of the full results. We exclude reporting regressions including the full set of independent variables used, a s detailed in Table 1, because a number of them proved to be statistically insignificant.Our main interest in the regression results reported in Table 4 is with the role that the regulatory proxies are playing in explaining the variation in the country dummies. The results are consistent with those reported in Table 3. Even though the parameter estimates for the regulatory variable are lower, regulatory governance still affects the growth performance of an economy. The regional dummies in this case are all negative and statistically significant, relative to the control group which is advanced countries13.These changes in the results were investigated and seem to reflect the differences in the modelling methods adopted, suggesting that in this type of research the modelling can affect the results. Nevertheless, the overall picture that emerges is that the quality and effectiveness of regulation has a positive effect on growth using both models. 27 5. CONCLUSIONS The provision of a re gulatory regime that promotes rather than constrains economic growth is an important part of good governance. The ability of the state to provide effective regulatory institutions can be expected to be a determinant of how well markets and the economy perform.The impact of regulatory institutions on economic growth will depend on both the efficiency of the regulatory policies and instruments that are used and the quality of the governance processes that are practised by the regulatory authorities, as discussed in the early part of the paper. This paper has tested the hypothesis that the efficiency and quality of regulation affects the economic performance of an economy. Two proxies for regulatory effectiveness were included separately and then combined as determinants of economic growth performance, using both cross-sectional and panel data methods.The results from both sets of modelling suggest a strong causal link between regulatory quality and economic growth and confirm that the standard of regulation matters for economic performance. The results are consistent with those of Olson et al. (1998) who found that productivity growth is strongly correlated with the quality of governance, and Kauffman et al (2005) who found that the quality of governance has a positive effect on incomes. As we highlighted earlier, the proxies we use for regulatory governance are correlated with a number of other institutional proxies.One could argue, therefore, that what we have established could equally hold for the link between institutional capacity in general and economic performance. However, the literature reviewed earlier in the paper is consistent with institutional capacity playing a strong and complementary role to regulatory governance 28 and the principal component analysis undertaken is supportive of this view. Nevertheless, the ability to model separately institutions in general and regulatory institutions or governance in particular remains problematic because of their potential complementarity.Hence, our results are perhaps most safely interpreted as demonstrating the importance of regulatory quality for economic growth in the context of wider institutional capacity building. Also, we acknowledge that in our analysis there is no control for the different regulated industrial sectors including privatised industries. Hence, the results need to be interpreted with care because of the heterogeneity of the sectors covered. The possibility that regulatory quality inputs differently across different industrial sectors cannot be ruled out.Unfortunately, data limitations prevented us from pursuing this issue. Finally, we acknowledge that the direction of causation between economic growth and regulatory quality deserves further investigation, Nevertheless, despite these caveats, we believe that there are good a priori grounds for assuming that better regulation leads to more rapid economic growth and that our empirical results are consistent with the view that â€Å"good† regulation is associated with higher economic growth in lower-income economies. 29 APPENDIX (a) List of countries included in the dataset14:Angola; Albania; Argentina; Australia; Austria; Azerbaijan; Belgium; Benin; Burkina Faso; Bangladesh; Bulgaria; Belarus; Bolivia; Brazil; Botswana; Canada; Switzerland; Chile; China; Cote d'Ivoire; Cameroon; Congo, Rep. ; Colombia; Costa Rica; Cyprus; Czech Republic; Denmark; Dominican Republic; Algeria; Ecuador; Egypt, Arab Rep. ; Spain; Estonia; Ethiopia; Finland; France; Gabon; United Kingdom; Georgia; Ghana; Guinea; Gambia; Greece; Guatemala; Guyana; Hong Kong (China); Honduras; Croatia; Haiti; Hungary; Indonesia; India; Ireland; Iran, Islamic Rep. Iceland; Israel; Italy; Jamaica; Jordan; Japan; Kazakhstan; Kenya; Kyrgyz Republic; Korea, Rep. ; Lebanon; Sri Lanka; Lesotho; Lithuania; Luxembourg; Latvia; Morocco; Moldova; Mexico; Macedonia; Mali; Malta; Mozambique; Mauritius; Malawi; Malaysia; Niger; Nigeria; Nic aragua; Netherlands; Norway; New Zealand; Pakistan; Panama; Peru; Philippines; Papua New Guinea; Poland; Portugal; Paraguay; Romania; Russian Federation; Senegal; Singapore; Sierra Leone; El Salvador; Sweden; Syrian Arab Republic; Togo; Thailand; Trinidad and Tobago; Tunisia; Turkey; Tanzania; Uganda; Ukraine; Uruguay; United States; Venezuela; Vietnam; Congo, Dem.Rep. ; Zambia; Zimbabwe. 30 NOTES 1. The World Bank defines good governance as â€Å"epitomized by predictable, open and enlightened policy making; a bureaucracy imbued with a professional ethos; an executive arm of government accountable for its actions; a strong civil society participating in public affairs, and all behaving under the rule of law† (World Bank, 1997). 2. 3. One of the authors of this paper has been involved in the design of regulatory institutions for Malawi.This expresses the observed data in each cluster as a linear function of the unobserved common component of governance, plus a disturbance ter m to capture perception errors and sampling variation in each indicator. 4. However, neither neoclassical nor endogenous growth theory gave regulation an explicit role. By assuming that output is at the limit provided by the available factor inputs and technology, neoclassical growth theory implicitly assumed no regulatory distortions. 5. Benhabib and Spiegel (1994) argue that the initial level of human capital can affect the growth path of productivity.Olson et al (1998) also use secondary school enrolment as a proxy explanatory variable in their growth study. 6. The most recent data set provided by Kauffman et al (2005) provides bi-annual data on indicators of governance over the period 1996-2004. In common with most empirical research in this area, we have converted time series data on the variables we have used in this study into 5-year averages for the period 1980-2000. However, if we were to do the same with the regulatory indices available it would give us only one observatio n for each country. If we were to extend our data to 2004, we would get two observations on these indices.Time dimensions of data on regulatory governance in either case would be too few to be able to apply panel data. In addition, given that these indicators change very slowly over time, as also acknowledged by Kauffman et al. , and that they only relate to the most recent periods, we do not find it informative to try to use them in a panel data analysis. We were able to confirm the stability of the regulation variables by replacing the data for 2000 with data for 1996 and 1998. The effect on our results was negligible (the results can be obtained from the authors). 7.There are two estimation procedures for panel data, fixed and random effects. In our case, the fixed effect method is the more appropriate one to use for the following reasons: (a) a priori we expect that 31 regulatory governance proxies to be correlated with the intercept term for each country; those with a poor or w eak regulatory governance are also expected to perform relatively badly in terms of economic performance; (b) we are interested in measuring differences between countries included in our data set; the parameter estimate for country dummies (the intercept term for each country) is a proxy for these differences.Intercepts in turn are used as a dependent variable in the second stage regression to establish the link between regulatory governance and country characteristics captured by the intercept term. The fixed effects method allows us to do this; (c) in small samples, similar to the one we are using here, there may be practical problems preventing parameter estimation when the random effect model is applied; this is not the case with the fixed effect model. For a more detailed discussion of these issues, see Verbeek (2000).Also, we applied the Hausman specification test and this confirmed that the fixed effect model is the more appropriate technique for our data. 8. http://www. worl dbank. org/wbi/governance/pubs/govmatters4. html The series constructed are composite indexes, which are based on a number of variables generated at different points in time. Information for each country on these proxies, therefore, generally relates to a period rather than a specific year. Kauffman and Kraay (2005) highlight certain issues relating to the quality of the data used, particularly when it is utilised for making comparisons across countries.However, we are not aware of better regulatory quality data, while conceding that better quality data could reveal different results to those reported here. Nevertheless, based on the significance level of the relevant variables in our regressions, we are fairly confident that any differences in the results would relate to the magnitude of these effects rather than their sign. 9. A number of the explanatory variables were logged. In the literature the basic growth accounting model is generally exponential (e. g. Cobb-Douglas).Once lo gged, it becomes a linear relationship which can then be estimated. For the other explanatory variables in our model, logging helped to solve problems of serial correlation and heteroscedasticity. 10. The difference in parameter estimates for the regulatory index is due to the scale effect generated by the weight used in calculating the first principal component of the two indicators. 11. However, we would not wish to over-emphasise the importance of this result given the data limitations as pointed out in Kauffman et al (2005).One could also argue that different proxies may have different dynamic effects on growth and that broader indicators of governance may require a longer period of time to produce their full effect on economic growth. 32 12. Net in this case applies to the log difference of different investment shares in GDP (physical and human in this case) and (d+n+g), where d is the rate of depreciation of capital per annum; n is the rate of population growth and g is a prox y for rate of technical change. As is the practice in the literature, (d+g) is assumed to be 5%. The specification is based on a Solow/Augmented Solow model. 3. 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Canada's Maple Leaf Bust Crack - Essay Example Articles by the media in the summer of 2008 covered reports on the outbreak showing colorful slips of a ‘listeriosis investigation’ eventually turned to entire wrenched, gray pieces such as â€Å"Sorry Situation† (Brent, 2008). In December following the summer which became a funeral mourning 22 million deaths upon the eating of cold-cuts sold by Maple Leaf Food’s two tainted lines at the entity’s Toronto headquarters, a $27 million-dollar class action lawsuit disabling a company which had already suffered a deficit that semester, the report fell that safety measures had shattered. Litigation inched its way into the top Canadian food-processing industry as the sentient illness forced its way across papers, the public opinion crying out a public timeline: â€Å"Listeriosis Outbreak in Toronto Now Linked to Five Deaths† (Ewing, 2008) in August, â€Å"Sorry Situation† (Brent, 2008), for September’s glow, and October’s gold-ree l, â€Å"Maple Leaf finds new listeria cases† (Elliott, 2008). President and chief-executive of the mega multi-billion dollar service-issuer in a clear concise way emulated a stream of heartfelt warmth to the public betwixt the sparkling timeline filled with protocol and positive results. In 2004 an article by Salvage entitled, â€Å"Petite hams pack a punch: smaller products are designed for on-the-go families,† excited consumers before four years along the timeline later another enchantment, â€Å"Maple Leaf designs pigs for markets† (Bertin, 2001), again stole the market. ... Total net revenue earnings were stunted by comparison with the previous year of 2005 in the range of $48.6 million and $815.9 million as opposed to the prior offsetting $101.9 and $800.8 million of agribusiness income and sales. Yet a hardwood-smoked, boneless, two pound ham offered a beautiful competition, on which a new sensation was being brought up, which elevated flexibility, color-binding, color and protein maximization at the foreground of a link between restructuring costs and Maple Leaf food designs, which was gaining speed in the race of the farmer’s market phenomenon. As all members of the now global indiscriminate ravager that has made its unique debut as the food industry must fall under the trick eventually, all facets indubitably must be tempted by that dollar which is called progress. Maple Leaf Incorporations won a nationally-esteemed award which bounded off its renovated products in 2011. While unpredictability should no doubt be a factor after the outbreak t wo years earlier, Canada’s grocer spontaneously waltzed to the front of the better end of its crisis quite literally, as the informational media announcement on paper specified in the heading called, â€Å"Contrite Maple Leaf vaults to forefront of food safety,† Sperber’s 2010 praise that detailed management’s proactive response to the fiasco two years prior. Even still Maple Leaf’s attempts at safety protocols and mandates before the widespread incident was in a small way commendable. In a spill of paramount thanks to the company’s chief executive and President Michael McCain, who inarguably urged to employ higher-tech equipment to ensure 2002 meat safety, Maple Leaf won the Annual Food Safety Leadership Award in 2006. Such cannot provide though, to that

Addiction to Mobile technology (smartphones, tablets and portable Research Paper

Addiction to Mobile technology (smartphones, tablets and portable gaming devices) and the negative effects on the individual." - Research Paper Example In addition, the authors identify significant level of depression with at least four symptoms of problematic cellular phone use (CPU). About 48 percent of the study’s participants reported at least a problematic CPU and this, considered together with the percentage that reported severe depression, suggests that a significant percentage of adolescents who use cellular phones suffer from depression because of the usage. Elements of problematic CPU and functional impairments that cellular usage and addiction cause are also symptoms of depression and this identify the addiction as a factor to depression. Withdrawal symptoms in the absence of CPU usage, poor interpersonal relationships, poor academic performance, and poor physical and psychological activity are some of the symptoms of problematic CPU that relates to depression and identifies addictive cellular phone usage as a cause of depression. The number of reported problems associated with addictive cellular phone usage is als o positively correlated with level of depression and this means that low-level addiction that has lower number of problem identifies low-level depression. Gender, age, and residential area moderate the relationship (Yen et al., 2009). Mobile phone usage also influences people’s behavior into addictive phone use and this has effects on behavior in other scopes. According to a study by Deursen, Bolle, Hegner, and Kommers (2015), using smartphone develops into an addiction to operation of the phones. This means that an individual who has the phone and is using it is likely to evolve into habitual usage such consistency in making calls, sending messages, and using internet applications in the phone. Developed habit of phone usage, which can also define phone addiction, means little time for social interactions and other activities such as studies to define a person’s tight schedule and

Report about google analysis and PESTLE Assignment

Report about google analysis and PESTLE - Assignment Example So a PESTEL analysis has been undertaken here to show how macro factors affect a search engine like Google. These include political, social, economic, technological, environmental and legal concerns and all these help in shaping the organization its internal strategies and conform to them. Google, Inc Google Inc, the giant in internet browsing, has been founded in the year 1998. Larry Page and Sergey Brin are the founders of the revolutionary internet browser. Google’s objective was to provide its customers with a quick and easy accessible browser. Google follows the mission statement where they claim â€Å"to organize the world’s information and make it universally accessible and useful†. Their focus is to offer their users a high quality search engine. This enables Google to expand their market share and to become the most popular web browser in the world (Google, Company Overview, 2013). How Google grew in size Through its operation Google Inc became a dominan t player in the internet market by offering a simple web page crawling. Google has followed a method of excellence in whatsoever they performed which accounted for their overall success. Google always rendered their effort to provide customers with a better and a faster browser. They incorporated excess bytes to enhance the efficiency of the webpage offering their consumers with better delivery of service. Google has always given importance to the speed factor in every product they launch (Anthony, 2008). Google Inc had followed a massive growth and continued to expand through continuous acquisition. They strategized acquisition as an expansion strategy and went on adding resources towards their product line. Their acquisitions include YouTube, Google voice, blogger, Google analytics etc. Google expanded their user base and continued to absorb web developers and engineers in their team (Guglielmo, 2012). Another important expansion strategy undertaken by Google is that they have alw ays prioritized their user. With the changing time and demands of the customers, Google has always offered their customers with innovative products. They designed the new internet browser keeping in mind their targeted customer group. Their goal in this pretext is to keep on building new tool and application for the users. They always built their tools in a very simplified way keeping in mind that the user found it to be user friendly enough. Google till date had successfully catered the need of their customers

Political philosophy Essay Example for Free

Political philosophy Essay Thomas Hobbes was born in Wiltshire, England on 5 April 1588 | birth_place = some sources say Malmesbury[2]). Born prematurely on April 5, 1588, when his mother heard of the coming invasion of the Spanish Armada, Thomas Hobbes later reported that my mother gave birth to twins: myself and fear. [3] His childhood is almost a complete blank, and his mothers name is unknown. [4] His father, also named Thomas, was the vicar of Charlton and Westport. Thomas Sr. abandoned his three children to the care of an older brother, Thomas juniors uncle Francis, when he was forced to flee to London after being involved in a fight with a clergyman outside his own church. Hobbes was educated at Westport church from the age of four, passed to the Malmesbury school and then to a private school kept by a young man named Robert Latimer, a graduate of the University of Oxford. Hobbes was a good pupil, and around 1603 he went up to Magdalen Hall, which is most closely related to Hertford College, Oxford. [5][6][7][8] The principal John Wilkinson was a Puritan, and he had some influence on Hobbes. At university, Hobbes appears to have followed his own curriculum; he was little attracted by the scholastic learning. He did not complete his B. A. degree until 1608, but he was recommended by Sir James Hussey, his master at Magdalen, as tutor to William, the son of William Cavendish, Baron of Hardwick (and later Earl of Devonshire), and began a life-long connection with that family. [9] Hobbes became a companion to the younger William and they both took part in a grand tour in 1610. Hobbes was exposed to European scientific and critical methods during the tour in contrast to the scholastic philosophy which he had learned in Oxford. His scholarly efforts at the time were aimed at a careful study of classic Greek and Latin authors, the outcome of which was, in 1628, his great translation of Thucydides History of the Peloponnesian War, the first translation of that work into English from a Greek manuscript. Although he associated with literary figures like Ben Jonson and thinkers such as Francis Bacon, he did not extend his efforts into philosophy until after 1629. His employer Cavendish, then the Earl of Devonshire, died of the plague in June 1628. The widowed countess dismissed Hobbes but he soon found work, again as a tutor, this time to the son of Sir Gervase Clifton. This task, chiefly spent in Paris, ended in 1631 when he again found work with the Cavendish family, tutoring the son of his previous pupil. Over the next seven years as well as tutoring he expanded his own knowledge of philosophy, awakening in him curiosity over key philosophic debates. He visited Florence in 1636 and later was a regular debater in philosophic groups in Paris, held together by Marin Mersenne. From 1637 he considered himself a philosopher and scholar. In Paris Hobbess first area of study was an interest in the physical doctrine of motion and physical momentum. Despite his interest in this phenomenon, he disdained experimental work as in physics. He went on to conceive the system of thought to the elaboration of which he would devote his life. His scheme was first to work out, in a separate treatise, a systematic doctrine of body, showing how physical phenomena were universally explicable in terms of motion, at least as motion or mechanical action was then understood. He then singled out Man from the realm of Nature and plants. Then, in another treatise, he showed what specific bodily motions were involved in the production of the peculiar phenomena of sensation, knowledge, affections and passions whereby Man came into relation with Man. Finally he considered, in his crowning treatise, how Men were moved to enter into society, and argued how this must be regulated if Men were not to fall back into brutishness and misery. Thus he proposed to unite the separate phenomena of Body, Man, and the State. Hobbes came home, in 1637, to a country riven with discontent which disrupted him from the orderly execution of his philosophic plan. However, by the end of the Short Parliament in 1640, he had written a short treatise called The Elements of Law, Natural and Politic. It was not published and only circulated among his acquaintances in manuscript form. A pirated version, however, was published about ten years later. Although it seems that much of The Elements of Law was composed before the sitting of the Short Parliament, there are polemical pieces of the work that clearly mark the influences of the rising political crisis. Nevertheless, many (though not all) elements of Hobbess political thought were unchanged between The Elements of Law and Leviathan, which demonstrates that the events of the English Civil War had little effect on his contractarian methodology. It should be noted, however, that the arguments in Leviathan were modified from The Elements of Law when it came to the necessity of consent in creating political obligation. Namely, Hobbes wrote in The Elements of Law that Patrimonial kingdoms were not necessarily formed by the consent of the governed, while in Leviathan he argued that they were. This was perhaps a reflection either of Hobbess thoughts concerning the engagement controversy or of his reaction to treatises published by Patriarchalists, such as Sir Robert Filmer, between 1640 and 1651. When in November 1640 the Long Parliament succeeded the Short, Hobbes felt he was a marked man by the circulation of his treatise and fled to Paris. He did not return for eleven years. In Paris he rejoined the coterie about Mersenne, and wrote a critique of the Meditations on First Philosophy of Descartes, which was printed as third among the sets of Objections appended, with Replies from Descartes in 1641. A different set of remarks on other works by Descartes succeeded only in ending all correspondence between the two. Hobbes also extended his own works somewhat, working on the third section, De Cive, which was finished in November 1641. Although it was initially only circulated privately, it was well received, and included lines of argumentation to be repeated a decade later in the Leviathan. He then returned to hard work on the first two sections of his work and published little except for a short treatise on optics (Tractatus opticus) included in the collection of scientific tracts published by Mersenne as Cogitata physico-mathematica in 1644. He built a good reputation in philosophic circles and in 1645 was chosen with Descartes, Gilles de Roberval and others, to referee the controversy between John Pell and Longomontanus over the problem of squaring the circle. The Civil War in England The English Civil War broke out in 1642, and when the Royalist cause began to decline in the middle of 1644 there was an exodus of the kings supporters to Europe. Many came to Paris and were known to Hobbes. This revitalised Hobbess political interests and the De Cive was republished and more widely distributed. The printing began in 1646 by Samuel de Sorbiere through the Elsevier press at Amsterdam with a new preface and some new notes in reply to objections. In 1647, Hobbes was engaged as mathematical instructor to the young Charles, Prince of Wales,[10] who had come over from Jersey around July. This engagement lasted until 1648 when Charles went to Holland. The company of the exiled royalists led Hobbes to produce an English book to set forth his theory of civil government in relation to the political crisis resulting from the war. The State, it now seemed to Hobbes, might be regarded as a great artificial man or monster (Leviathan), composed of men, with a life that might be traced from its generation under pressure of human needs to its dissolution through civil strife proceeding from human passions. The work was closed with a general Review and Conclusion, in direct response to the war which raised the question of the subjects right to change allegiance when a former sovereigns power to protect was irrecoverably gone. Also he criticized religious doctrines on rationalistic grounds in the Commonwealth. Frontispiece from De Cive (1642) During the years of the composition of Leviathan he remained in or near Paris. In 1647 Hobbes was overtaken by a serious illness which disabled him for six months. On recovering from this near fatal disorder, he resumed his literary task, and carried it steadily forward to completion by the year 1650. Meanwhile, a translation of De Cive was being produced; there has been much scholarly disagreement over whether Hobbes translated the work himself or not. In 1650, a pirated edition of The Elements of Law, Natural and Politic was published. It was divided into two separate small volumes (Human Nature, or the Fundamental Elements of Policie and De corpore politico, or the Elements of Law, Moral and Politick). In 1651 the translation of De Cive was published under the title of Philosophicall Rudiments concerning Government and Society. Meanwhile, the printing of the greater work was proceeding, and finally it appeared about the middle of 1651, under the title of Leviathan, or the Matter, Forme, and Power of a Common Wealth, Ecclesiasticall and Civil, with a famous title-page engraving in which, from behind hills overlooking a landscape, there towered the body (above the waist) of a crowned giant, made up of tiny figures of human beings and bearing sword and crozier in the two hands. The work had immediate impact. Soon Hobbes was more lauded and decried than any other thinker of his time. However, the first effect of its publication was to sever his link with the exiled royalists, forcing him to appeal to the revolutionary English government for protection. The exiles might very well have killed him; the secularist spirit of his book greatly angered both Anglicans and French Catholics. Hobbes fled back home, arriving in London in the winter of 1651. Following his submission to the council of state he was allowed to subside into private life in Fetter Lane. Leviathan Main article: Leviathan (book) Frontispiece of Leviathan In Leviathan, Hobbes set out his doctrine of the foundation of states and legitimate governments based on social contract theories. Leviathan was written during the English Civil War; much of the book is occupied with demonstrating the necessity of a strong central authority to avoid the evil of discord and civil war. Beginning from a mechanistic understanding of human beings and the passions, Hobbes postulates what life would be like without government, a condition which he calls the state of nature. In that state, each person would have a right, or license, to everything in the world. This inevitably leads to conflict, a war of all against all (bellum omnium contra omnes), and thus lives that are solitary, poor, nasty, brutish, and short (xiii). To escape this state of war, men in the state of nature accede to a social contract and establish a civil society. According to Hobbes, society is a population beneath a sovereign authority, to whom all individuals in that society cede their natural rights for the sake of protection. Any abuses of power by this authority are to be accepted as the price of peace. However, he also states that in severe cases of abuse, rebellion is expected. In particular, the doctrine of separation of powers is rejected:[11] the sovereign must control civil, military, judicial and ecclesiastical powers. Leviathan was also well-known for its radical religious views, which were often Hobbess attempt to reinterpret scripture from his materialist assumptions. His denial of incorporeal entities led him write, for example, that Heaven and Hell were places on Earth, and to take other positions out of sync with church teachings of his time. Much has been made of his religious views by scholars such as Richard Tuck and J. G. A. Pocock, but there is still widespread disagreement about the significance of Leviathans contents concerning religion. Many have taken the work to mean that Hobbes was an atheist, while others find the evidence for this position insufficient. Locke John Locke (pronounced /l? k/; 29 August 1632 – 28 October 1704) was an English philosopher. Locke is considered the first of the British empiricists, but is equally important to social contract theory. His ideas had enormous influence on the development of epistemology and political philosophy, and he is widely regarded as one of the most influential Enlightenment thinkers, classical republicans, and contributors to liberal theory. His writings influenced Voltaire and Rousseau, many Scottish Enlightenment thinkers, as well as the American revolutionaries. This influence is reflected in the American Declaration of Independence. [1] Lockes theory of mind is often cited as the origin for modern conceptions of identity and the self, figuring prominently in the later works of philosophers such as David Hume, Jean-Jacques Rousseau and Immanuel Kant. Locke was the first philosopher to define the self through a continuity of consciousness. He also postulated that the mind was a blank slate or tabula rasa; that is, contrary to Cartesian or Christian philosophy, Locke maintained that people are born without innate ideas, and that knowledge is instead determined only by experience derived by sense perception. [2] Contents[hide] * 1 Life * 1. 1 Epitaph * 2 Influence * 2. 1 Constitution of Carolina * 2. 2 Theory of value and property * 2. 3 Political theory * 2. 3. 1 Limits to accumulation * 2. 4 On price theory * 2. 4. 1 Monetary thoughts * 2. 5 The self * 3 List of major works * 3. 1 Major unpublished or posthumous manuscripts * 4 Secondary literature * 5 See also * 6 Notes * 7 Further reading * 8 External links * 8. 1 Works * 8. 2 Resources| Life Lockes father, who was also named John Locke, was a country lawyer and clerk to the Justices of the Peace in Chew Magna,[3] who had served as a captain of cavalry for the Parliamentarian forces during the early part of the English Civil War. His mother, Agnes Keene, was a tanners daughter and reputed to be very beautiful. Both parents were Puritans. Locke was born on 29 August 1632, in a small thatched cottage by the church in Wrington, Somerset, about twelve miles from Bristol. He was baptized the same day. Soon after Lockes birth, the family moved to the market town of Pensford, about seven miles south of Bristol, where Locke grew up in a rural Tudor house in Belluton. In 1647, Locke was sent to the prestigious Westminster School in London under the sponsorship of Alexander Popham, a member of Parliament and former commander of the younger Lockes father. After completing his studies there, he was admitted to Christ Church, Oxford. The dean of the college at the time was John Owen, vice-chancellor of the university. Although a capable student, Locke was irritated by the undergraduate curriculum of the time. He found the works of modern philosophers, such as Rene Descartes, more interesting than the classical material taught at the university. Through his friend Richard Lower, whom he knew from the Westminster School, Locke was introduced to medicine and the experimental philosophy being pursued at other universities and in the English Royal Society, of which he eventually became a member. Locke was awarded a bachelors degree in 1656 and a masters degree in 1658. He obtained a bachelor of medicine in 1674, having studied medicine extensively during his time at Oxford and worked with such noted scientists and thinkers as Robert Boyle, Thomas Willis, Robert Hooke and Richard Lower. In 1666, he met Lord Anthony Ashley Cooper, 1st Earl of Shaftesbury, who had come to Oxford seeking treatment for a liver infection. Cooper was impressed with Locke and persuaded him to become part of his retinue. Locke had been looking for a career and in 1667 moved into Shaftesburys home at Exeter House in London, to serve as Lord Ashleys personal physician. In London, Locke resumed his medical studies under the tutelage of Thomas Sydenham. Sydenham had a major effect on Lockes natural philosophical thinking – an effect that would become evident in the An Essay Concerning Human Understanding. Lockes medical knowledge was put to the test when Shaftesburys liver infection became life-threatening. Locke coordinated the advice of several physicians and was probably instrumental in persuading Shaftesbury to undergo an operation (then life-threatening itself) to remove the cyst. Shaftesbury survived and prospered, crediting Locke with saving his life. It was in Shaftesburys household, during 1671, that the meeting took place, described in the Epistle to the reader of the Essay, which was the genesis of what would later become the Essay. Two extant Drafts still survive from this period. It was also during this time that Locke served as Secretary of the Board of Trade and Plantations and Secretary to the Lords and Proprietors of the Carolinas, helping to shape his ideas on international trade and economics. Shaftesbury, as a founder of the Whig movement, exerted great influence on Lockes political ideas. Locke became involved in politics when Shaftesbury became Lord Chancellor in 1672. Following Shaftesburys fall from favour in 1675, Locke spent some time travelling across France. He returned to England in 1679 when Shaftesburys political fortunes took a brief positive turn. Around this time, most likely at Shaftesburys prompting, Locke composed the bulk of the Two Treatises of Government. Locke wrote the Treatises to defend the Glorious Revolution of 1688, but also to counter the absolutist political philosophy of Sir Robert Filmer and Thomas Hobbes. Though Locke was associated with the influential Whigs, his ideas about natural rights and government are today considered quite revolutionary for that period in English history. However, Locke fled to the Netherlands, Holland, in 1683, under strong suspicion of involvement in the Rye House Plot (though there is little evidence to suggest that he was directly involved in the scheme). In the Netherlands Locke had time to return to his writing, spending a great deal of time re-working the Essay and composing the Letter on Toleration. Locke did not return home until after the Glorious Revolution. Locke accompanied William of Oranges wife back to England in 1688. The bulk of Lockes publishing took place after his arrival back in England – his aforementioned Essay Concerning Human Understanding, the Two Treatises of Civil Government and A Letter Concerning Toleration all appearing in quick succession upon his return from exile. John Locke Lockes close friend Lady Masham invited him to join her at the Mashams country house in Essex. Although his time there was marked by variable health from asthma attacks, he nevertheless became an intellectual hero of the Whigs. During this period he discussed matters with such figures as John Dryden and Isaac Newton. He died in 28 October 1704, and is buried in the churchyard of the village of High Laver,[4] east of Harlow in Essex, where he had lived in the household of Sir Francis Masham since 1691. Locke never married nor had children. Events that happened during Lockes lifetime include the English Restoration, the Great Plague of London and the Great Fire of London. He did not quite see the Act of Union of 1707, though the thrones of England and Scotland were held in personal union throughout his lifetime. Constitutional monarchy and parliamentary democracy were in their infancy during Lockes time. Epitaph Original Latin: â€Å"| SISTE VIATOR Hic juxta situs est JOHANNES LOCKE. Si qualis fuerit rogas, mediocritate sua contentum se vixesse respondet. Literis innutritus eo usque tantum profecit, ut veritati unice litaret. Hoc ex scriptis illius disce, quae quod de eo reliquum est majori fide tibe exhibebunt, quam epitaphii suspecta elogia. Virtutes si quas habuit, minores sane quam sibi laudi duceret tibi in exemplum proponeret; vita una sepeliantur. Morum exemplum si squaeras in Evangelio habes: vitiorum utinam nusquam: mortalitatis certe (quod prosit) hic et ubique. 1632 Aug. 29Mortuum Anno Dom. 1704 Oct. 28Memorat haec tabula brevi et ipse interitura. | †| English Translation: â€Å"| STOP TRAVELLER Near this place lies JOHN LOCKE. If you are wondering what kind of man he was, he answers that he was contented with his modest lot. Bred a scholar, he made his learning subservient only to the cause of truth. You will learn this from his writings, which will show you everything about him more truthfully than the suspect praises of an epitaph. His virtues, if indeed he had any, were too slight to be lauded by him or to be an example to you. Let his vices be buried with him. Of virtue you have an example in the gospels, should you desire it; of vice would there were none for you; of mortality surely you have one here and everywhere, and may you learn from it. That he was born on the 29th of August in the year of our Lord 1632and that he died on the 28th of October in the year of our Lord 1704this tablet, which itself will soon perish, is a record. | †| Influence Locke exercised a profound influence on political philosophy, in particular on modern liberalism. Michael Zuckert has in fact argued that Locke launched liberalism by tempering Hobbesian absolutism and clearly separating the realms of Church and State. He had a strong influence on Voltaire who called him le sage Locke. His arguments concerning liberty and the social contract later influenced the written works of Alexander Hamilton, James Madison, Thomas Jefferson, and other Founding Fathers of the United States. In fact, several passages from the Second Treatise are reproduced verbatim in the Declaration of Independence, most notably the reference to a long train of abuses. Such was Lockes influence, Thomas Jefferson wrote; Bacon, Locke and Newton.. I consider them as the three greatest men that have ever lived, without any exception, and as having laid the foundation of those superstructures which have been raised in the Physical and Moral sciences. [5][6] Today, most contemporary libertarians claim Locke as an influence. But Lockes influence may have been even more profound in the realm of epistemology. Locke redefined subjectivity, or self, and intellectual historians such as Charles Taylor and Jerrold Seigel argue that Lockes Essay Concerning Human Understanding (1690) marks the beginning of the modern conception of the self. [7] Constitution of Carolina Appraisals of Locke have often been tied to appraisals of liberalism in general, and also to appraisals of the United States. Detractors note that (in 1671) he was a major investor in the English slave-trade through the Royal Africa Company, as well as through his participation in drafting the Fundamental Constitution of the Carolinas while Shaftesburys secretary, which established a feudal aristocracy and gave a master absolute power over his slaves. They note that as a secretary to the Council of Trade and Plantations (1673-4) and a member of the Board of Trade (1696-1700) Locke was, in fact, one of just half a dozen men who created and supervised both the colonies and their iniquitous systems of servitude[8] Some see his statements on unenclosed property as having justified the displacement of the Native Americans. Because of his opposition to aristocracy and slavery in his major writings, he is accused of hypocrisy, or of caring only for the liberty of English capitalists. Theory of value and property. Locke uses the word property in both broad and narrow senses. In a broad sense, it covers a wide range of human interests and aspirations; more narrowly, it refers to material goods. He argues that property is a natural right and it is derived from labor. Locke believed that ownership of property is created by the application of labor. In addition, property precedes government and government cannot dispose of the estates of the subjects arbitrarily. Karl Marx later critiqued Lockes theory of property in his social theory. Political theory. See also: Two Treatises of Government Lockes political theory was founded on social contract theory. Unlike Thomas Hobbes, Locke believed that human nature is characterized by reason and tolerance. Like Hobbes, Locke believed that human nature allowed men to be selfish. This is apparent with the introduction of currency. In a natural state all people were equal and independent, and everyone had a natural right to defend his â€Å"Life, health, Liberty, or Possessions, basis for the phrase in America; Life, liberty, and the pursuit of happiness. [9] Like Hobbes, Locke assumed that the sole right to defend in the state of nature was not enough, so people established a civil society to resolve conflicts in a civil way with help from government in a state of society. However, Locke never refers to Hobbes by name[10] and may instead have been responding to other writers of the day. [11] Locke also advocated governmental separation of powers and believed that revolution is not only a right but an obligation in some circumstances. These ideas would come to have profound influence on the Constitution of the United States and its Declaration of Independence. Limits to accumulation Labor creates property, but it also does contain limits to its accumulation: man’s capacity to produce and man’s capacity to consume. According to Locke, unused property is waste and an offense against nature. However, with the introduction of â€Å"durable† goods, men could exchange their excessive perishable goods for goods that would last longer and thus not offend the natural law. The introduction of money marks the culmination of this process. Money makes possible the unlimited accumulation of property without causing waste through spoilage. He also includes gold or silver as money because they may be â€Å"hoarded up without injury to anyone,† since they do not spoil or decay in the hands of the possessor. The introduction of money eliminates the limits of accumulation. Locke stresses that inequality has come about by tacit agreement on the use of money, not by the social contract establishing civil society or the law of land regulating property. Locke is aware of a problem posed by unlimited accumulation but does not consider it his task. He just implies that government would function to moderate the conflict between the unlimited accumulation of property and a more nearly equal distribution of wealth and does not say which principles that government should apply to solve this problem. However, not all elements of his thought form a consistent whole. For example, labor theory of value of the Two Treatises of Government stands side by side with the demand-and-supply theory developed in a letter he wrote titled Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money. Moreover, Locke anchors property in labor but in the end upholds the unlimited accumulation of wealth. On price theory Locke’s general theory of value and price is a supply and demand theory, which was set out in a letter to a Member of Parliament in 1691, titled Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money. [12] Supply is quantity and demand is rent. â€Å"The price of any commodity rises or falls by the proportion of the number of buyer and sellers. † and â€Å"that which regulates the price[of goods] is nothing else but their quantity in proportion to their rent. † The quantity theory of money forms a special case of this general theory. His idea is based on â€Å"money answers all things† (Ecclesiastes) or â€Å"rent of money is always sufficient, or more than enough,† and â€Å"varies very little†¦Ã¢â‚¬  Regardless of whether the demand for money is unlimited or constant, Locke concludes that as far as money is concerned, the demand is exclusively regulated by its quantity. He also investigates the determinants of demand and supply. For supply, goods in general are considered valuable because they can be exchanged, consumed and they must be scarce. For demand, goods are in demand because they yield a flow of income. Locke develops an early theory of capitalization, such as land, which has value because â€Å"by its constant production of saleable commodities it brings in a certain yearly income. † Demand for money is almost the same as demand for goods or land; it depends on whether money is wanted as medium of exchange or as loanable funds. For medium of exchange â€Å"money is capable by exchange to procure us the necessaries or conveniences of life. † For loanable funds, â€Å"it comes to be of the same nature with land by yielding a certain yearly income †¦ or interest. † Monetary thoughts Locke distinguishes two functions of money, as a counter to measure value, and as a pledge to lay claim to goods. He believes that silver and gold, as opposed to paper money, are the appropriate currency for international transactions. Silver and gold, he says, are treated to have equal value by all of humanity and can thus be treated as a pledge by anyone, while the value of paper money is only valid under the government which issues it. Locke argues that a country should seek a favorable balance of trade, lest it fall behind other countries and suffer a loss in its trade. Since the world money stock grows constantly, a country must constantly seek to enlarge its own stock. Locke develops his theory of foreign exchanges, in addition to commodity movements, there are also movements in country stock of money, and movements of capital determine exchange rates. The latter is less significant and less volatile than commodity movements. As for a country’s money stock, if it is large relative to that of other countries, it will cause the country’s exchange to rise above par, as an export balance would do. He also prepares estimates of the cash requirements for different economic groups (landholders, laborers and brokers). In each group the cash requirements are closely related to the length of the pay period. He argues the brokers – middlemen – whose activities enlarge the monetary circuit and whose profits eat into the earnings of laborers and landholders, had a negative influence on both ones personal and the public economy that they supposedly contributed to. The self Locke defines the self as that conscious thinking thing, (whatever substance, made up of whether spiritual, or material, simple, or compounded, it matters not) which is sensible, or conscious of pleasure and pain, capable of happiness or misery, and so is concerned for itself, as far as that consciousness extends. [13] He does not, however, ignore substance, writing that the body too goes to the making the man. [14] The Lockean self is therefore a self-aware and self-reflective consciousness that is fixed in a body. In his Essay, Locke explains the gradual unfolding of this conscious mind. Arguing against both the Augustinian view of man as originally sinful and the Cartesian position, which holds that man innately knows basic logical propositions, Locke posits an empty mind, a tabula rasa, which is shaped by experience; sensations and reflections being the two sources of all our ideas. [15] Lockes Some Thoughts Concerning Education is an outline on how to educate this mind: he expresses the belief that education maketh the man, or, more fundamentally, that the mind is an empty cabinet, with the statement, I think I may say that of all the men we meet with, nine parts of ten are what they are, good or evil, useful or not, by their education. [16] Locke also wrote that the little and almost insensible impressions on our tender infancies have very important and lasting consequences. [17] He argued that the associations of ideas that one makes when young are more important than those made later because they are the foundation of the self: they are, put differently, what first mark the tabula rasa. In his Essay, in which is introduced both of these concepts, Locke warns against, for example, letting a foolish maid convince a child that goblins and sprites are associated with the night for darkness shall ever afterwards bring with it those frightful ideas, and they shall be so joined, that he can no more bear the one than the other. [18] Associationism, as this theory would come to be called, exerted a powerful influence over eighteenth-century thought, particularly educational theory, as nearly every educational writer warned parents not to allow their children to develop negative associations. It also led to the development of psychology and other new disciplines with Dav.