Noel Maurer

Associate Professor of Business Administration (Leave of Absence)

Noel Maurer is an associate professor at the Harvard Business School in the Business, Government and the International Economy (BGIE) unit. Maurer earned his Ph.D. from Stanford University in 1997. Between 1998 and 2004 he worked as an assistant professor in the Department of Economics at ITAM, a university in Mexico City. Maurer also worked at an NGO dedicated to helping small rural communities in Chiapas find new business opportunities for their inhabitants.  He joined the Business School faculty in 2004.

Maurer’s primary research interest is on how governments protect (or fail to protect) property rights and how do private actors defend their property rights against predatory governments or in the face of political instability? Maurer’s first two books, The Power and the Money and The Politics of Property Rights (the second co-authored with Stephen Haber and Armando Razo) examined how Mexican politicians and private actors created mechanisms that enabled investors to protect their property rights by transferring rents to third parties upon whom the government depended for political support. If those rents were interrupted, then the third parties would withdraw their support, and the government would risk collapse. These arrangements allowed Mexico’s economy to grow substantially despite a revolution, a counter-revolution, a counter-counter-revolution, two military coups, three coup attempts, three civil wars, and two presidential assassinations.  Maurer’s third book, Mexico Since 1980 (co-authored with Herb Klein, Kevin Middlebrook and Stephen Haber) asked why Mexico’s authoritarian government collapsed in the 1980s and 1990s.  It also asks how Mexico’s transition to democracy affected the business environment.  What did democracy change and what did it not? 

He is currently researching the history of the U.S. government's attempts to protect American investors when they venture outside the United States.  He is also working on further developing a course on the politics and economics of the energy business.

  1. The Myth of the Resource Curse

    by Noel Maurer

    The so-called "resource curse" hypothesis argues that plentiful natural resources distort political systems and lead countries to be worse off in the long run. While it is certainly possible to squander a mining or oil boom, however, there are few cases in which a country appears to have been worse off than it would have been with less abundant natural resources.
  2. The Panama Canal

    by Noel Maurer

    The Big Ditch is the first quantitative economic history of the Panama Canal and its effect on Panama, the United States, and the world economy.  It makes three general arguments.  First, that the Panama Canal was very important to American commerce through the 1940s.  Second, American policy unintentionally denied Panama any economic benefits from the Canal until the 1970s.  Finally, since the 1999 handover, the Panamanians have run the Canal far better than the Americans ever did.

    The canal provided large cost savings for American commerce before 1940.  Despite very large cost overruns, and a seven-year delay in opening to commercial traffic, the benefits of the canal were more than enough to justify the cost.  The canal redistributed income from the South to the Northwest, spurring the Northwestern lumber industry, and it facilitated the expansion of the Californian oil industry.  (The railroads, perhaps surprisingly, were not much affected.) 

    After World War 2, the canal's importance to the United States declined rapidly.  International traffic outstripped intercoastal traffic, which moved to the interstate highways.  Most international cargos were commodities, in which the non-American producers would bear the impact of any rate hikes imposed by a non-American canal management.  Finally, aid to Panama (spent in order to prevent discontent) rapidly outstripped the profits the canal earned the Treasury.  Yet nationalist sentiment inside the United States, and a real fear that Panama might mismanage the canal, made a handover difficult. 

    Omar Torrijos, who ruled Panama as a dictator in the 1960s and 1970s, set the stage for the successful handover.  He eliminated patronage networks (for his own reasons, of course) and created the embryo of the banking and trade cluster that would help Panama prosper decades later.  The 1977 Panama Canal treaty set a 22-year transfer period, giving Panamanians time to learn the skills needed to operate the canal.  Finally, the democratic government that followed the American overthrown of Manuel Noriega in 1989 created a number of clever institutional mechanisms to insure that the Panama Canal would be run as a profit-making private enterprise despite 100% state ownership. 

    The final result was today's Panama Canal Authority, which since 1999 has greatly improved the canal's productivity and profitability.  The Canal's new management focuses on “shareholder value,” rather than the bureaucratic incentives that defined the American period.  Rather than a source of discontent, the canal has become a source of growth for Panama, and continues to be one of the world's most important trade links.

  3. Political Risk, Foreign Intervention and International Arbitration

    by Noel Maurer

    The Empire Trap:  America's Attempts to Protect Property Rights Overseas, 1898-2008, is a history of the U.S. government's attempts to protect the property rights of American investors when they venture outside the boundaries of the United States.  Washington's willingness to deploy American power, soft and hard, varied dramatically across the century, but one pattern held until the 1960s:  U.S. governments would categorically reject interventionism designed to favor or protect Americans, only to find themselves drawn back into involvement in the affairs of foreign nations on behalf of private American interests.  What explains this pattern, how was it broken in the 1960s, and will it return in the future?

    The Empire Trap argues that it is, as a general principle, very hard for democratic governments to credibly promise to ignore the interests of their citizens’ when they venture abroad.  The political reason is simple:  foreign policy is as subject to capture by private interests as any other public policy.  Private interests have multiple tools at their disposal.  They can mobilize nationalist sentiment.  They can create ways to tie their interests to other foreign policy interests of the United States.  They can find ways to insure that a failure to protect their interests will damage the executive's credibility in other spheres.  Finally, overseas investors can benefit from the fact that the benefits of U.S. intervention accrue largely to a small group, while the costs are diffuse and spread over society.  The economic characteristics of intervention facilitate these strategies.  Simply put, each marginal intervention by the U.S. government appears to have a small economic cost.  With each intervention, however, the government's credibility becomes more tied up with the policy's goal.  Once the U.S. government begins to actively support the activities of another, for whatever reason, policies become very hard to reverse.

    The U.S. found itself sucked into the empire trap repeatedly over the 20th century.  The U.S. annexed the Philippines and Puerto Rico in 1898 for reasons that had nothing to do with the property rights of Americans.  The experience was not pleasant, and few people wanted to repeat the experience.  Yet by 1928 the U.S. government ran Haiti, the Dominican Republic, and Nicaragua; its officials were embedded in the governments of Bolivia, Colombia, Cuba, Honduras, and Panama; and it had explicit contingent commitments to intervene on behalf of its investors in Costa Rica, Guatemala, Peru, and Venezuela.  The massive shock of the Great Depression allowed the Hoover and Roosevelt administrations to disengage from those commitments, but even before the 1930s ended FDR (against his better instincts) had been drawn into using American economic power to force Mexico to compensate the expropriated oil companies.  After World War 2, the Eisenhower administration, to its chagrin, found itself manipulated into overthrowing foreign governments on behalf of American businesses.  The Eisenhower and Kennedy administration tried to ignore Third World expropriations, only to have Congress mandate the imposition of crushing sanctions in the event that a foreign government seized American properties. 

    How was the cycle broken?  In the context of the Cold War, the potential cost of punishing foreign governments was huge.  The Soviets could move into any gap.  The empire trap had become a lot more dangerous.  The U.S., therefore, backed the creation of the institutions of international arbitration (the same ones that govern cross-border investment today) not to protect overseas property rights, nor solve international coordination problems, nor apply a new set of norms about "proper" international behavior.  Rather, said institutions were created give the American executive branch a credible political excuse not to act on behalf of American investors abroad.  The government could point business towards arbitration, and use the existence of international institutions to justify a refusal to sanction foreign governments. 

    Today, however, the institutions created during the 1960s have come under strain, tasked with missions that they were not designed to carry out.  Should they be allowed to collapse, the empire trap could reopen.  Policy makers and business leaders need to think hard about the tradeoffs involved in getting the government back into the business of protecting property rights outside the boundaries of the United States, especially in a world where other countries, increasingly, will be facing their own versions of the empire trap.