This paper is an exploratory analysis of the role that banks play in supporting the mechanism of exchange. It considers a model economy in which exchange activities are facilitated and coordinated by a self-organizing network of entrepreneurial trading firms. Collectively, these firms play the part of the Walrasian auctioneer, matching buyers with sellers and helping the economy to approximate equilibrium prices that no individual is able to calculate. Banks affect macroeconomic performance in this economy because their lending activities facilitate entry of trading firms and also influence their exit decisions. Both entry and exit have conflicting effects on performance, and we resort to computational analysis to understand how they are resolved. Our analysis sheds new light on the conflict between micro-prudential bank regulation and macroeconomic stability. Specifically, it draws an important distinction between "normal" performance of the economy and "worst-case" scenarios, and shows that micro prudence conflicts with macro stability only in bad times. The analysis also shows that banks provide a "financial stabilizer" that in some respects can more than counteract the more familiar financial accelerator.

This paper examines the relationship between witchcraft beliefs, a deep-rooted cultural phenomenon, and various elements of social capital. Using novel survey data from nineteen countries in Sub-Saharan Africa we establish a robust negative association between the prevalence of witchcraft beliefs and multiple measures of trust which holds after accounting for country fixed effects and potential confounding factors at the individual, regional, and ethnic-group levels. This finding extends to other metrics of social capital, namely charitable giving and participation in religious group activities. Such coexistence of witchcraft beliefs and antisocial attitudes stands in stark contrast to a well-explored alternative cultural equilibrium characterized by religious prosociality. Evidence from societies beyond Africa shows that in preindustrial communities where witchcraft is believed to be an important cause of illness, mistrust and other antisocial traits are inculcated since childhood. Furthermore, second-generation immigrants in Europe originating from countries with widespread witchcraft beliefs are generally less trusting.

This paper presents a new dataset on subnational ethnolinguistic and religious diversity in Sub-Saharan Africa covering 36 countries and almost 400 first-level administrative units. We use population censuses and large-scale household surveys to compile detailed data on the ethnolinguistic composition of each region and match all reported ethnicities to Ethnologue, a comprehensive catalog of world languages. This matching allows us to standardize the notion of an ethnolinguistic group and account for relatedness between language pairs, a correlate of shared history and culture, when calculating diversity indices. Exploiting within-country variation provided by our new dataset, we find that local public goods provision, as reflected in metrics of education, health, and electricity access, is negatively related to ethnolinguistic diversity, but only if the underlying basic languages are first aggregated into larger families or if linguistic distances between groups are taken into consideration. In other words, only deeprooted diversity, based on cleavages formed in the distant past, is strongly inversely associated with a range of regional development indicators. Furthermore, we show that subnational diversity has been remarkably persistent over the past two-three decades implying that population sorting in the short to medium run is unlikely to bias our main findings.

This paper is an exploratory analysis of the role that banks play in supporting what Jevons called the "mechanism of exchange." It considers a model economy in which exchange activities are facilitated and coordinated by a self-organizing network of entrepreneurial trading firms. Collectively, these firms play the part of the Walrasian auctioneer, matching buyers with sellers and helping the economy to reach prices at which peoples' trading plans are mutually compatible. Banks affect macroeconomic performance in this economy because their lending activities facilitate the entry and influence the exit decisions of trading firms. Both entry and exit have ambiguous effects on performance, and we resort to computational analysis to understand how they are resolved. Our analysis draws an important distinction between normal and worstcase scenarios, with the economy experiencing systemic breakdowns in the latter. We show that banks can provide a "financial stabilizer" that more than counteracts the familiar financial accelerator, and that the stabilizing role of the banking system is particularly apparent in worst-case scenarios. In line with this result, we also find that under less restrictive lending standards banks are able to more effectively improve macroeconomic performance in the worst-case scenarios.

This paper presents a new dataset on subnational ethnolinguistic and religious diversity in Sub-Saharan Africa covering 36 countries and almost 400 first-level administrative units. We use population censuses and large-scale household surveys to compile detailed data on the ethnolinguistic composition of each region and match all reported ethnicities to Ethnologue, a comprehensive catalog of world languages. This matching allows us to standardize the notion of an ethnolinguistic group and account for relatedness between language pairs, a correlate of shared history and culture, when calculating diversity indices. Exploiting within-country variation provided by our new dataset, we find that local public goods provision, as reflected in metrics of education, health, and electricity access, is negatively related to ethnolinguistic diversity, but only if the underlying basic languages are first aggregated into larger families or if linguistic distances between groups are taken into consideration. In other words, only deeprooted diversity, based on cleavages formed in the distant past, is strongly inversely associated with a range of regional development indicators. Furthermore, we show that subnational diversity has been remarkably persistent over the past two-three decades implying that population sorting in the short to medium run is unlikely to bias our main findings.