Myopic Banditry and Foreign Settlement on the Gold Coast: the Emergence of Bad Institutions in Ghana, 1843-1966
Abstract: This work analyzes the emergence of bad institutions in the Gold Coast (contemporary Ghana) from 1843 to 1966. To do so, it modifies Olson’s familiar bandit metaphor by introducing the notion of myopic foreign banditry, a situation that manifests when a colonial power does not have long term settlement objectives. Using simple game theory to characterize the political-economic dynamics of the modified bandit metaphor, it suggests that the exogenous institutional shock of myopic British colonization at the Gold Coast lowered the discount factors of local agents. As a result, time horizons shortened and agents starting preferring appropriation over production.
