BESLEY’S PAPER studies the role of civic culture in expanding fiscal capacity in a political economy model of the interaction between policy-making élites and tax-paying citizens. At an equilibrium, (i) élites choose the tax rate t and the composition of expenditures between public goods G and private rents B, while (ii) citizens choose their tax compliancy, 1 − n. Civic culture is defined by a form of intrinsic reciprocity, a reduced disutility for paying taxes when taxes are used to provide public goods rather than transfers and rents to the élites. I read this paper through the eyes of a fascinating and broad agenda on the role of institutions and culture in fostering economic development, which Besley has prominently contributed to; for example, Besley and Persson (2019).1 My comments aim at elucidating the theoretical contribution of the paper to this literature. First of all, I will argue that the results of the paper are bound to hold at least qualitatively in different models as long as they display a fundamental complementarity between civic culture and public good provision, opening the analysis to new and interesting implications. I will then attempt an analysis of the institutional design of the polity of the state, for example, its constitutional frame, legal structure and enforcement mechanisms, political procedures, rights and regulations enforced by official authorities, and so on, in the context of the model. I will illustrate how this analysis produces a rich set of novel implications with regards to institutional change and to the institutional correlates of civic capital, state capacity, and public goods provision. I will also show that the maintained assumption in the model, that élites display commitment when choosing policy, has important implications. Relaxing this assumption also produces interesting implications for the study of culture and institutions. Finally, I will briefly speculate on the dynamics of civic culture which can be obtained in the model if inter-generational cultural transmission is characterized by some form of imperfect altruism on the parts of the parents. Complementarity between civic culture and public good provision. The formal model in the paper focuses on how civic culture affects state capacity and public good provision: civic-minded citizens are more willing to comply with taxation when public goods are provided and this aligns the incentives of élites with those of the citizenry (the élites do not pay taxes but enjoy public goods). At equilibrium, therefore, state capacity and public good provision G increase with the fraction of civic-minded citizens, that is, with civic capital μ. Furthermore, the postulated dynamics of μ (a reduced-form replicator dynamics to capture inter-generational transmission of cultural traits) has the property that μ increases with the provision of public goods G

A VIEW STILL WIDELY HELD among economists is that given the objective of maximizing a Paretian social welfare function-rationing of private goods is inferior to transfers and subsidies. Hence, existing rationing, e.g. in housing programs involving rent regulation, subsidized medical treatment to needy individuals, distribution of day care for children according to need, etc., is often interpreted as a reflection of paternalistic objectives on the part of the government or simply as bad policy; see Tobin (1970). The purpose of this paper is to challenge the general validity of this conventional wisdom in the context of a traditional model of public sector pricing supplemented by an anonymous rationing scheme which affects individuals' consumption patterns significantly. As is often the case, a government cannot achieve distributional equity (i.e., situations where the social value of marginal utility of income is equal for all individuals) by means of taxes and transfers because the use of these instruments is subject to various constraints. This is a common feature of many taxation models; cf. Atkinson and Stiglitz (1980). From a purely technical point of view, there is scope for improving on social welfare in such situations by means of other measures such as rationing. But, since the use of rationing as well as taxes and transfers is likely to be restricted by the same underlying factors, e.g. information about consumers' preferences and endowments or administrative costs, it may be questioned whether rationing qualifies as an efficient policy instrument. The type of rationing considered in this paper is stochastic rationing; when prices are set at levels which generate excess demand, some of the potential consumers are randomly barred from the markets entirely so that demand equals supply. From the point of view of implementation, such a rationing scheme has the desirable property of not requiring the government to have information about preferences and endowments at the individual consumer level; nor is extensive administration required. Another interesting aspect of such a scheme is that, in a sense, it represents a lower bound on rationing schemes since, in most cases, actual rationing can be based on some information about consumers. Therefore, if there are cases where a market-clearing equilibrium can be improved upon by reducing prices below market-clearing levels combined with elimination of excess demand by means of stochastic rationing, the argument for rationing as a potentially efficient policy tool is in fact fairly strong. In this paper we show that such cases do exist. We also indicate that stochastic rationing may still be efficient even in situations where prices can be highly differentiated among different groups of individuals, e.g. income groups. We conclude that the absence of costless redistribution of income, which indeed seems to be consistent with real-world situations, is crucial for the results. Two kinds of policy changes are considered. The first involves eliminating a marginal excess demand by means of rationing. In the model in this paper, there is a continuum of consumers. Therefore, while such a marginal rationing affects some consumers in a nonmarginal fashion, it only affects an infinitesimal group of consumers. Hence, it only