The Size of Nations.

• Author: Friedman, David
• Position: Book Review

The Size of Nations By Alberto Alesina and Enrico Spolaore Cambridge, Mass.: MIT Press, 2003. Pp. 272. $35.00 cloth.

In The Size of Nations, Alberto Alesina and Enrico Spolaore investigate two interesting and related issues: how big a nation ought to be and how big nations will be. Their central assumptions are that the advantage of large nations is economies of scale in the production of public goods and the disadvantage is the increasing heterogeneity of a population as its size increases. A big nation can spread the cost of producing public goods over more people, thus reducing the cost per capita, but in doing so it runs into the "one size fits all" problem. The amount and nature of the public good produced may be close to optimal for all of the members of a small, homogenous population, but the larger the nation is, the larger and less homogeneous its population becomes. For individuals whose preferences are far from those the public good is designed to satisfy, it may not be worth its cost. Indeed--a point the authors do not mention--its value may be negative. Consider the "public good" of enforcing religious conformity.

A second simplifying assumption--wildly unrealistic but very useful when it comes to providing formal mathematical proofs--is that the world can be represented by a line, nations being segments on that line, and that an individual's position on the line represents both geography and preferences. Thus, the center of the segment corresponding to a nation represents both its geographical center and its median voter's policy preferences.

Given these assumptions, the calculation of what the size of nations should be is in principle straightforward--the size that maximizes the summed benefit to everyone, defined in the usual economic sense, given both the costs and the benefits of larger or smaller nations. Calculating what the size will be requires additional assumptions that take two forms, representing two alternative views of government.

Democracy

Alesina and Spolaore's democratic model assumes that the median voter determines the quantity and quality of public goods. It further assumes a voting procedure under which a nation may be divided by majority vote or two nations may be merged by separate majority votes in each. Additional constraints, such as a border resident's freedom to switch countries, are added in parts of the analysis.

Majority voting leads to a problem. People on the periphery of a nation of optimal size pay the same price for public goods as those near the nation's center, but they get public goods...