3 Lessons From Political Economist Alberto Alesina

Like Dani Rodrik, the Italian Alberto Alesina is one of those Harvard University economists who provide sound arguments and largely unimpeachable data. His articles and books – whether on fiscal policies, country size in relationship to economic growth, ethnic heterogeneity, or a little bit of several inter-related topics – are of course open for rebuttal.

For example, one can criticize him from a Keynesian or national conservative perspective. 2008 Nobel Prize laureate Paul Krugman has criticized Alesina and Silvia Ardagna’s article ”Large changes in fiscal policy: taxes versus spending” (2009). A nationalist on the other hand, can point out that growth size should be weighted against long-term cultural cohesion.

Nevertheless Alesina’s work – often co-authored with other scholars – can inform the reader on a number of crucial sub-topics, related to broader subjects such as economics, politics and demography.

My aim is to briefly present a number of significant arguments and make suggestions on how to complement these ideas with other important aspects of research. Typically, this selection is done from an American perspective, but the reader can contextualize many of these ideas in order to understand other nations as well. Hopefully, it can offer some insights with regard to the overall situation for U.S. citizens, on which state to live in, or even secession.

1. Larger countries are often (but not always) more powerful than smaller ones

There are economic pros from having a large population, such as that per capita costs of public goods are lower (as long as the largest share of the population pays for them, thus forming a large tax base). Additionally, a larger country is less subject to foreign aggression. Furthermore, larger populations often go hand in hand with larger markets. For good and for bad, this does also imply that richer regions or states within a country can cover for less prosperous places.

For that reason, the large size has been crucial in the process of making America great. It is only one main factor but still of great importance.

2. Smaller countries are often (but not always) wealthier than larger ones

However, size has to be weighted against other dimensions such as GDP per capita and the totality of ethnic heterogeneity (racial, ethnic, religious and linguistic) and its implications at the federal, regional and local level.

Generally, a larger population implies larger heterogeneity among different groups and individuals. There are exceptions throughout the world, such as Japan, but in the case of the U.S., the country’s population has increased in conjunction with larger heterogeneity, during the last 20 years in particular. Alesina stresses:

Much more important are the facts that as countries become larger, diversity of preferences, culture, language, “identity” of their population increases. In one word, heterogeneity of preferences increases with size. Being part of the same country implies agreeing on a set of policies: from redistributive schemes, to public goods to foreign policy; as heterogeneity increases, more and more diverse individuals will have to agree on them. Certain policies can be delegated to localities in order to allow for diversity, but not every policy can be local. As heterogeneity increases, then, more and more individuals or regions will be less satisfied by the central government policies. In fact many harsh domestic conflicts are associated with racial, religious, and linguistic heterogeneity and have threatened the stability of national governments. Easterly and Levine (1997) have documented convincingly how ethnic heterogeneity often interferes with the implementation of good and growth enhancing policies. La Porta et al. (1999), show that various measures of quality of governments in a cross-section of countries are generally inversely related to the degree of ethnic fragmentation. Alesina, Baqir, and Hoxby (2000) document how the preference for racial and income homogeneity contributes to determining the choice of borders of municipalities and school districts in the United States. Alesina and La Ferrara (2000, 2002) relate the extent of participation in social activities and trust (social capital) to the degree of racial fragmentation in American communities.

Plus, most of the richest countries in the world are indeed very small:

The five largest countries (by population) in the world are China, India, the United States, Indonesia, and Brazil. Among them, only the United States is a rich country. By contrast, many of the richest countries in the world are small. Of the ten richest countries in the world, in terms of GDP per capita, only four have populations above 1 million. They are the United States (260 million people), Switzerland (7 million), Norway (4 million people), and Singapore (3 million people). Of these four, two are below average in terms of population. Singapore experienced the second highest growth rate in the world between 1960 and 1990: 6.3 percent per year. During the same period, the fastest growing economies outside East Asia were Botswana (1 million people), with a growth rate of 5.7 percent per year, and Malta (300,000 inhabitants), which, with 5.4 percent, had the highest growth rate in Europe.

On the other hand, according to Alesina and other economists, smaller countries have to rely on the openness of other markets; they are more inter-dependent. This is an important lesson if one wishes to live in a smaller country. The United States could perhaps be fairly independent if it would allow to cut down on certain material goods and products.

3. Ethnic fragmentation decreases social cohesion and governing

With ethnic heterogeneity one can mean several things, depending on the context. In the U.S. it has the meaning of both racial, linguistic, religious and more subjective and self-defining factors (for instance, blacks and Hispanics tend to be partly or largely of European ancestry). Regardless of exact definitions, ethnic fragmentation and polarization – two terms that Alesina uses in this article – tend to lead to several negative outcomes.

A large literature on US localities show that in more ethnically fragmented communities, public goods provision is less efficient, participation in social activities and trust is lower, and economic success, measured by growth of city size, is inferior. Evidence that trust does not travel well across racial lines is also supported by experimental evidence.

Of course, people should strive for to make things work as good as possible, but to increase the ethnic diversity even more is indeed only negative. Especially if one takes significant educational as well as cultural differences into account.


Overall, quantity has to be balanced with quality. Specifically the so-called human capital of the country’s inhabitants has to be taken into account, but also the values and preferences of presumptive new citizens. In addition, increased ethnic fragmentalization and heterogeneity do likely negatively effect economic growth (GDP per capita size in particular), quality of governance, and social cohesion.

Alesina’s work cover many important dimensions of these questions, but I would suggest the German psychologist Heiner Rindermann’s work on educational achievement and national IQ differences as a complement. For instance, there are differences between high-skilled and low-skilled Indians. If one is sceptical about to bring in contentious issues such as IQ into the debate, then educational achievement among groups and individuals can function as a proxy.

Read More: 5 Lessons About Building A Nation From Singaporean Political Visionary Lee Kuan Yew

32 thoughts on “3 Lessons From Political Economist Alberto Alesina”

  1. I think the US could be a prosperous country in perfect isolation, which I recall this being the original idea from the Founding Fathers. However, somebody found that a big government could be useful for…

        1. Different specifics; same themes and concerns through the centuries. That’s why Virgil and Homer are still relevant today.

  2. “For that reason, the large size has been crucial in the process of
    making America great. It is yet one main factor but still of great
    Yeah, it’s not like it was high average IQ……
    “2. Smaller countries are often (but not always) wealthier than larger ones”
    Yeah, wonder why it’s Norway, Singapore and Switzerland that is your examples…..and not Swaziland….maybe it’s that high average IQ again.

        1. IQ being static or malleable – at the individual, group or nation level – is a false dichotomy: it is somewhere in between. Just because it is not static, however, does not mean that it is not relatively stable. It is relatively stable whenever a population reaches a certain level of material development. The implication of this is that Westerners and East Asians (except from North Korea) have sort of peaked their IQ:s in terms of overall genetic potential at the macro level. For example, if it will shrink then it is because factors such as dysgenic effects from the population and/or immigration. Probably immigrants, who speak bad English and have less beneficial local environments, can be affected by environmental factors too, so it is not black or white.

      1. What about them? They have a higher average IQ than Swaziland. Let’s not forget that these places are no longer under communist rule and are growing heavily gdp-wise.

  3. Another important lesson. A strong, united minority is better to control the effective power that a large, weak and divided majority.
    Irak, Lybia were controled by a small minority wich was NOT the biggest clan, religious group or even the wealthiest (at first).
    That’s still the case in Syria.
    You can control a situation while being outnumbered, if you put the most able person at your head, and if you’re able to keep unity in your ranks.
    In fact, other group could think to put you in charge if you’re able to maintain your structure when everything else is collapsing.
    In a multi confessional states, like most arab nations, this approach is very comon.
    Christians, Yazidis and other minorities strongly regret old tyrans, because without them, the majority of people will crush them to oblivion…

      1. “The whole religious complexion of the modern world is due to the absence from Jerusalem of a lunatic asylum.”
        ― Thomas Paine

    1. “It does not require a majority to prevail, but rather an irate, tireless minority keen to set brush fires in people’s minds” — Samuel Adams

    1. No it’s not. Just because we don’t accept your tepid socialist-lite progressivism doesn’t mean that we’re “blind”. That’s some serious hubris you have going on there Jammy.

      1. Yes, I believe in socialized police, socialized firefighters, socialized roads, socialized bridges, socialized dams, optional socialized hospitals, optional socialized education, and nearly socialized agriculture.
        Oh wait, that makes me American.
        You yourself apparently volunteered to serve in the biggest and most expensive socialized military in the world. Eye, meet plank.
        Rightie libertarian types always want to relitigate the entire New Deal because it doesn’t satisfy some deep sense of mathematical justice. But as FDR said, “The test of our progress is not whether we add more to the abundance of those who have much, it is whether we provide enough for those who have little.”
        I know you hate that because Jefferson wouldn’t have approved. His vision, however, has not really prevailed, and you’re in the minority. Socialism is as American as apple pie, which can be bought at Wal-Mart, which depends on socialized food stamps for its workers.
        Go on with your bad self. Rage, rage against any form of mandatory cooperation. The rest of us in the cities will continue doing what ***works***.

    1. What could possibly go wrong having people with completely different cultures, religion, genetic tendencies and loyalties competing with each other for resources and influence under the same roof.
      Perhaps one group has figured out how to mold them into identity and spiritless consumerists to be farmed.

  4. Making America great. The globalists took the idea and interpreted it in a literal way.
    1. Instead of large GDP per capita, large BMI per capita. It is the easiest way to make America and the rest of the world more equal and indeed greater.
    2. Large BMI per capita spreading almost all over the world through McDonald’s and globalization. The neo-cucks and shitlibs wanted to make everyone fat, thinking that if they cannot have democracy in Iraq and Libya, they can at least have hamburgers and Starcucks so we can become equally obese.
    3. Ergo: The reign of quantity. The quality of people decreases, in parallel with an increase of quantity.

    1. I believe it is a bipartisan National Security issue; not a Left vs. Right issue.
      I agree with these retired Admirals and Generals, our physical and educational weakness is a National Security issue https://www.strongnation.org/issues/strong-national-security
      Michele Obama tried to protect our country by focusing on the health of our children:

    1. Diversity works when a tyran rules. If he fell, that means WAR. Look at middle east. Why did you think than christian yazidi or minority islamic groups regret so much Saddham or Kadhafi ?
      Societies needs homogeinity and strong societal rules to work. The less homogeinity, the strongest the power at the top must be to prevent war of each communities against the others.

  5. I guess this is the rock and the hard place Great Britain currently finds itself in. As a smaller nation much of our wealth seems dependent on ethnic heterogeneity, despite the unhappiness and dysfunction multiculturalism has caused.

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