Size Matters

The Size of Nations, by Alberto Alesina and Enrique Spolaore (Cambridge, MA: MIT Press, 2003). 272 pages. $35.00.

East Timor is a small nation, slightly larger than Connecticut and 235 times smaller than Indonesia. It has a population of fewer than one million people. On May 20, 2002, East Timor broke away from Indonesia and was recognized as the world's newest independent country. By now it also boasts many of the other trappings that signal nationhood: a seat at the United Nations and a recently published Lonely Planet travel and phrase book.

The rise of international organizations and multinational corporations over the last generation made talk about the end of the age of nation-states fashionable. But more recent events—from East Timor's secession to conflicts in the Caucasus to debates in regional assemblies in North America and Europe—suggest that nation-states are still the critical players in international relations. Against this backdrop, The Size of Nations, by Alberto Alesina and Enrique Spolaore, explores intriguing questions about the role of population size in the formation, expansion and efficacy of states.

Much of the book is filled with graphs, regressions and equations, but the authors make it easy for those without a facility or interest in the mathematical theory of their arguments to consider their conclusions. The authors did well to make this book more accessible because the basic ideas are engaging and provide useful data and theses for those interested in the changing boundaries of nations.

Some of the more interesting parts of the book are quick facts that will likely stay with readers long after they finish reading. For example, at the end of the Second World War there were 74 independent countries; now there are 193. Furthermore, "more than half [of the world's countries] are smaller in size than Massachusetts, which has about six million inhabitants."¹ And while it is common knowledge that China is the world's biggest country with 1.2 billion citizens, Alesina and Spolaore do us a favor by reminding us that the smallest country with a seat at the United Nations is Tuvalu, population 11,000.

The consideration of optimal country size is not new. As noted by the authors, Plato had a characteristically exact answer to the question of optimal country size: 5,040 heads of family. Aristotle had a similar preference for small nations, writing that "experience has shown that it is difficult, if not impossible, for a populous state to be run by good laws."²

Alesina and Spolaore challenge the notion that the size of a country is purely an exogenous factor, no more a human construction than geological factors like mountains or rivers. In considering the size of nations as man-made, the authors hypothesize that the optimal size of a state involves a trade-off between the benefits of economies of scale and the costs of legislating across a heterogeneity of preferences. In other words, there may be cost efficiencies in larger-sized states, but that can also imply unpopular one-size-fits-all policies.

Theoretically, fixed costs of government decrease as they are spread out across more citizens, making public goods like defense and the civil service cheaper per person (an argument championed over two hundred years ago in The Federalist Papers). The authors acknowledge the limitations of this theory, however, especially as the world becomes more peaceful and stable. Consider, for example, American defense spending, which far outstrips other countries in terms of actual dollars and as a percentage of GDP.

What the authors term "the heterogeneity of preferences" within a country is a critical counterpart to the economies of scale theory. The Soviet Union may have enjoyed economies of scale in several cases, but it was also legislating for a huge land mass and population comprising many different countries. In a dictatorial regime, this centralized direction can potentially continue to operate, but the more open a country is, the more problematic the democratic deficit becomes. The increased autonomy of regions within European...