From Foreign Affairs, March/April 2004

The question of whether there is an "optimal size" for nation-states has long intrigued scholars, and the European Union's ongoing expansion makes it of more than passing interest. This intriguing study by two political economists seeks to discover an economic logic behind the size of nations. Their approach is rationalist and deductive, based on the costs and benefits of holding more or less territory. Large states may benefit from increased productivity, lower per capita costs for public goods, and more troops to defend themselves, but they also must deal with greater cultural and political variety. Alesina and Spolaore, surveying historical data on size and economic performance, discuss these as tradeoffs that states make at critical historical moments. Most of their findings are not surprising -- for example, that globalization reduces the advantages of size. Nor is their message to Europe startling: it should centralize authority where economic integration is possible and decentralize authority where cultural and political preferences diverge. But ultimately, what is most striking about the proliferation of states in the twentieth century is how little impact such economic considerations have had.