A Simulation Model of Katouzian's Theory of Arbitrary State and Society

Abstract

This paper represents an initial effort to model the volatile behavior of Iran's socio-political-economic system. More specifically, Homa Katouzian's theory of Iranian political economy—a well-established descriptive theory of Iran's unstable economic development—is translated into a system dynamics model, tested for internal consistency, and used for policy analysis. Simulation results confirm Katouzian's claim that periodic episodes of significant arbitrary power are key to understanding the historically less-than-optimal behavior of the Iranian socioeconomic system. They also confirm the significance of oil revenue, economic sanctions, and civil resistance on Iranian economic development. Of note is that experimentation with the model reveals that educational policies that generate increased respect for the law by Iranian citizens can significantly improve the behavior of the Iranian socioeconomic system. The paper concludes with suggestions for future research.

Keywords::

• Iran
• Katouzian
• social chaos
• arbitrary state
• system dynamics

Acknowledgements

The authors would like to thank Homa Katouzian, the participants of the Collective Learning Meetings at Worcester Polytechnic Institute, and four anonymous referees for their thoughtful comments on earlier drafts of this paper. Any errors of omission and/or commission in this version of the paper are the sole responsibility of the authors.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Figure 1 was created from a combination of two datasets. The first source of data, shown in the left-side diagram, comes from the work of Bharier (1971, p. 59), who provides a realistic estimate of Iran's real GNP from 1900 to 1960 in constant 1959 prices. The second source, shown in the right-side diagram, comes from the online portal of Iran's Central Bank (Central Bank of Iran, 2014), which provides data on Iran's real GNP from 1959 to 2010 in constant 1997 prices.

² Saeed (1992) argues that complex dynamic behavior modes should be “sliced” into simpler qualitative time shapes (i.e., reference modes) so that a system dynamics modeling effort can be directed toward capturing the feedback processes that generate them.

³ See Esfahani, Mohaddes, and Pesaran (2013) for a comprehensive review of Iranian macroeconomic modeling efforts.

⁴ See for example Habib-Agahi (1971), Beharie (1973), Heiat (1987), Valadkhani (1997), and Becker (1999).

⁵ Some of the most well-known theories in this area are “the Asiatic mode of production” of Karl Marx (Shiozawa, 1966), Max Weber's “theory of social and economic organization” Weber (1947), and Wittfogel's “oriental despotism” (Wittfogel, 1957).

⁶ This question is the title of a popular book in Iran written by Kazem Alamdari (2010); see for example Alamdari (2010), Arianpour (2003), Ashraf (1980), Katouzian (1978, 1981, 1997, 2003), Peyman (2003), Piran (2005) and Tabatabaei (2001).

⁷ Radzicki (2009) reports some of these efforts in his paper.

⁸ For a detailed and updated review of Mashayekhi's model which explores its capabilities and limitations, see Langarudi and Radzicki (2013).

⁹ The causal relationships that underlie Katouzian's theory will not be justified here as this evidence exists in Katouzian's numerous works (Katouzian, 1978, 1981, 1997, 2003, 2004, 2009, 2010, 2011). The interested reader can easily refer to them for additional information.

¹⁰ A system dynamics model is essentially an institutionalist pattern model. See Radzicki (1988, 1990a, 1990b) for a comprehensive discussion of economic methodology and its relationship to system dynamics modeling.

¹¹ For a lively discussion on the challenges inherent in translating someone else's descriptive theory into a system dynamics model, see Wittenberg (1992), Sterman (1992), Radzicki (1992), Barlas (1992), and Wittenberg and Sterman (1992).

¹² The structure described here represents a synthesis of the ideas presented in numerous publications written by Katouzian (1978, 1979, 1981, 1983, 1997, 2003, 2004, 2005, 2009, 2010, 2011).

¹³ Readers who are unfamiliar with the conceptual tools of system dynamics modeling are encouraged to consult a basic primer on the subject such as: http://www.systemdynamics.org/DL-IntroSysDyn/index.html.

¹⁴ In the model, “capital” includes all types of income-generating assets including land, commercial and industrial capital, plant and equipment, etc.

¹⁵ Of course, this type of basic economic growth mechanism is found in many models in modern economic growth theory.

¹⁶ The literature on the causes and consequences of corruption or kleptocracy in developing nations is vast and a comprehensive survey is beyond the scope of this paper. The interest reader should consult Søreide (2014) for an excellent overview.

¹⁷ Here, the law means a written and constitution-based law, which remains constant over time and place.

¹⁸ See Section 5.2 for details of this simulation experiment.

¹⁹ In the Katouzian model, as in neoclassical microeconomics, Utils represent units of satisfaction/dissatisfaction. Of course, because utility is not a characteristic that is directly measurable, Utils do not represent an actual unit of measurement such as inches or pounds.

²⁰ The dynamic behavior over any particular period of time in Figures 8 and 9 does not necessarily correspond to actual historical periods or events. Rather, dividing the simulation run into different time periods makes it easier to understand the model's pattern of behavior.

²¹ See for example Forrester (1973), Peterson (1975, 1980), Mass and Senge (1978), Forrester and Senge (1980), Sterman (1984), Radzicki (2004), Barlas (1996), and Oliva (2003).

²² That is, the causal structure of the model has already been described in Section 2 and the behavior reproduction tests have been reported in Section 3.

²³ The complete documentation of the Katouzian model, along with all variable definitions and complete equation specifications, is available in electronic form from the authors. The model was created in Vensim and a free version of this software (http://vensim.com/download/) is available so that interested readers can reproduce the simulations presented in this paper and run simulation experiments of their own choosing.

²⁴ The model's behavior was only significantly altered when the parameters and initial values were pushed beyond the ranges that are reported in the Appendix.

²⁵ For recent surveys on this issue, see Frankel (2012) and Esfahani, Mohaddes, and Pesaran (2013).

²⁶ See for example Bapat, Heinrich, Kobayashi, and Morgan (2013), Cortright and Lopez (2000, 2002), Daoudi and Dajani (1983), Elliott and Uimonen (1993), Escribà-Folch and Wright (2010), Hufbauer, Elliott, Cyrus, and Winston (1997), Hoffmann (1967), Hufbauer, Schott, and Elliott (1990), Knorr (1973), Krain (2014), Lektzian and Souva (2007), Marinov (2005), Martin (1993), Morgan and Schwebach (1997), Nincic and Wallensteen (1983), Pape (1997), Peksen and Drury (2010) and Tsebelis (1990).

²⁷ In practice, it is difficult to convince a large percent of a nation's people to engage in civil resistance. Indeed, respect for the law is a cultural characteristic that cannot be changed quickly. Nevertheless, it is still worthwhile to see what would happen if increased civil resistance were to occur in Iran because negative results would indicate that this approach should not be pursued.

²⁸ Although at first pass this scenario appears to be the “magic bullet” that fixes everything, some caution is in order. According to research by Saeed (1986), high economic growth rates provide the state with financial resources that will mostly be invested in national defense, which in turn can hinder future economic growth. This can create a cyclical of political instability that is fairly common in developing countries. It can be a good exercise for the future research to see if the inclusion of the mentioned structure can distort the results of this paper.