The Dark Side: bailouts and path dependence

(via Mankiw) “Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.”

 
Blattman refers us to the dark sideof path dependence: “Pogroms during the Black Death are a strong and robust predictor of violence against Jews in the 1920s, and of votes for the Nazi Party. In addition, cities that saw medieval anti-Semitic violence also had higher deportation rates for Jews after 1933, were more likely to see synagogues damaged or destroyed in the Night of Broken Glass in 1938, and their inhabitants wrote more anti-Jewish letters to the editor of the Nazi newspaper Der Stürmer.”

Cardon, commenting on Aid Watch’s citation of his work on development in the US South: “It was the structure of institutions and social capital that had built up around slavery that constrained the South’s ability to make a peaceful and prosperous transition. … Even when we get unambiguous changes from an Evil system (like slavery) to a Good system (like freedom), societies with a new Good system will be constrained by norms and social capital that have accumulated around the Evil system. … Someday, I want to write a paper in which I ask whether cotton was to the antebellum South as oil and diamonds are to some countries today: an exportable commodity that provides high incomes for elites but that masks the underlying pathological institutions."