CInSt Research Seminar

Saumitra Jha, Associate Professor of Political Economy, Stanford Graduate School of Business, has presented a paper "Swords into Bank Shares: Financial Solutions to the Threat of Political Violence" on October, 1.

Abstract
This project analyzes the promise and limitations of financial instruments as a means for fostering broad political coalitions that favor peace and beneficial reforms. It takes as a departure point the benchmark theory of portfolio choice, in which all agents hold the same (market) portfolio of risky assets. This may also align political incentives, as all individuals can gain from policies that improve the returns or lower the risks of the market portfolio, including risks stemming from political instability and conflict. The project then analyzes a range of historical cases in which the introduction of financial assets have succeeded or failed at making politics less conflictual over time, focusing on three revolutionary states that subsequently led the world in economic growth: England, the early United States and Meiji Japan. Next the project exploits a series of field experiments to test whether financial mechanisms can help raise support for peace in contemporary settings which face the threat of violence, including in India, Israel and elsewhere. Finally, the project draws upon the theory, the historical cases and the field experiments to assess the promise and limitations of financial approaches in solving political economy challenges more generally.

Information about the speaker

Link to the video