Three Essays on Institutional Change in Afghanistan

Homa Saleh

Advisor: Christopher Coyne, PhD, Department of Economics

Committee Members: Peter J. Boettke, Peter T. Leeson

Mercatus Center, Board Room
April 24, 2013, 03:30 PM to 12:00 PM


This dissertation explores institutional changes in Afghanistan in two different periods. The first part of the dissertation highlights the historical institutional setting before the emergence of the Taliban in the late 1980’s. The second part of the dissertation discusses the effects of the post-US intervention reforms in Afghanistan with focus on the disjoint between intended policy goals and the realities on ground. The analysis blends and applies insights from New Institutional Economics and Austrian Economics to understand: (1) the ability of “outsiders” to generate exogenous institutional change, (2) the unintended consequences associated with such efforts, and (3) the realities of Afghanistan in the pre- and post-occupation periods. The dissertation consists of five chapters including a survey of the relevant literature, three essays, and concluding remarks and implications.

The first essay explores the historical evolution and role of Pashtunwali norms in Afghanistan. I analyze the economics of Pashtunwali and highlight the notion of honor in as a self-enforcing conflict resolution mechanism facilitating cooperation and trade. Evidence shows that in the absence of effective state-based institutions, credit was present and enforced in rural areas of Afghanistan between ethnically homogenous people and ethnically diverse agents.

The second essay surveys the literature on implementing institutional change in regards to the knowledge problem and the enforcement cost of imposing formal rules when there is a disjoint with existing institutions. Research suggests that exogenous rule reforms often suffer from a knowledge problem and therefore fail to “stick” in the desired manner. Employing this logic I explore the local realities on the ground in Afghanistan with particular focus on the central role of tribes and jirgas, the practice of Pashtunwali (customary law), the use of community based conflict resolution, and the relative effectiveness of local policing. In doing so, I highlight the disjoint between these realities and the desired reforms intended to change Afghanistan’s institutions.

Using the anthropological analysis of Coburn (2012) as a starting point, the third chapter examines the local institutions in Istalif, a town in Afghanistan. I discuss the effective practices, self-enforcing norms and conventions exercised by the economic and political actors. Istalif represents one manifestation of this reality and makes clear why efforts at top-down institutional change have often failed to stick in the desired manner. The recognition and appreciation of the local complexities in Afghanistan lead to strong skepticism regarding proposed efforts to impose reforms through national institutions.