The purpose of this essay is to review the books <em>Why Nations Fail</em> by Daron Acemoglu and James Robinson, and <em>Pillars of Prosperity</em> by Timothy Besley and Torsten Persson. The essay briefly discusses the main contributions of the books and the role of politics for economic performance. The review...

When the quality of a good is at the discretion of the seller, how can buyers assure that the seller provides the mutually efficient level of quality? Contracts that provide a bonus to the seller if the quality is acceptable or impose a penalty on the seller if quality is unacceptable can, in...