Political Institutions and their Effect on Economic Policy
             Imagine, if you will, a country with no political
             institutions. A country ruled by anarchy. What kind of
             economic policy would this country have or would it have one
             at all? Now imagine a country with highly powerful and
             regimented political institutions. What kind of economic
             policy would this country have? The two fictitious
             countries mentioned above would certainly have very
             different economic policies. The first would probably be
             lucky to even have an economic policy at all. Its citizens
             would live in a world of economic uncertainty, never knowing
             what their future may hold. On the other hand, the citizens
             of the second country, although possibly unhappy with their
             ruler, would at least have a pretty good idea of their
             economic future. These citizens would be able to place
             their money in banks and exchange it in international
             markets. They could save for their future without the fear
             of having everything taken from them at any given moment.
             What is it though that makes the economic policies of these
             countries so different? While there are clearly many
             factors that affect a country's economic policy, in this
             paper I would like to argue that the most important one is
             the presence or lack of strong political institutions.
             In the beginning large nations or political states did
             not exist. The law of the land was every man for himself.
             As time went on small bands of people began to form. In the
             beginning membership in such groups was voluntary, but those
             who joined soon learned of the benefits of cooperation.
             With time these bands became larger and larger and it was
             apparent that some groups were stronger than others. The
             strongest of these groups became what is known as "roving
             bandits". (Olson 1993,568). If the "roving bandits" can be
             seen as the first form of political institution then the
             ...