 Violence, I think, is the single biggest missing feature in economics. Economics of development, economists dominate the thinking about economic development and rightly so. They have the best theories of the way the world works, the way market works, and yet I feel that they miss the margin of violence, and because of that they don't understand the nature of the development problem. And we can quantify this by thinking about the incidence of violence and ask how frequent is violence in the developing world. And the way to ask the question, or the way we ask the question, has to do with how frequent our violent regime changes, takeover of the government, how frequent is that. And it turns out it's remarkably frequent. That is, in the developing world it's about once every seven years. It's very different in the developed world, because in the developed world it turns out it's once every 60 years. So developed countries face much less of a problem of violence. And moreover, we argue that while all countries have to solve the problem of violence, that the developed countries do so in a very different way than the developing countries. So developed countries solve the problem through economic integration. So economic integration lowers violence because if you and I are on potential sides that might be a political dividing line that could possibly lead to violence, if you and I are economically integrated so that we depend on one another, then this raises the cost to us of fighting. So one of the key features of developing economies is what we call the natural state. That is because of the possibility of violence, developing countries organize themselves in a way that mitigate the problem of violence. They don't completely solve it, but they mitigate it. And by that we mean that they are rent creation societies, meaning that they give privileges to various groups, powerful groups and individuals as a means of giving them incentives to cooperate and not to fight. So the basic idea is that groups that have the power to use violence have to see themselves as better off by playing a cooperative strategy rather than fighting. And so the way natural states do that is by giving them various forms of privileges, these special preferential tariffs that cut off competition from imports. They may get a monopoly on the local cement factory or the local beer factory, so they are the only ones that produce beer in a particular area. And the key is that this creates these barriers to market forces, create rents that give them something to lose if they exercise violence. Economists don't see the same mechanism. They see that the problem is one of largely economic intervention. That is the government creates policies that prevent markets from working. And as a consequence they suggest that the road to reform, that is the way to fix this, is to dismantle the controls over the market and let the market make its magic. The problem that they miss, however, is the problem of violence, that if the nature of these controls on markets are in fact designed to solve the problem of violence, then dismantling these policies do not produce economic reform in markets. Instead, they threaten violence. And so as a consequence, these reforms, even 50 years worth of these reforms, tend not to have very much of a success. Another issue we're thinking about is violence in the third world. It's quite prevalent. The Middle East, for example, is far more violent in the last five to 10 years than it had been in the previous decades. And the question is, is there a way of mitigating this violence? And I think there's multiple ways of thinking about it. The dominant way tends to think in terms of, oh, well, what we need to do is create democracies, that is, looking at these countries as if they're a whole state and a united population, whereas they tend not to be united populations. There are many different differences, sometimes religion, sometimes sectarian, sometimes it's the nature of geographic differences. And I think one way to think about the problem that comes from this perspective I've been suggesting has to do with the nature of stabilizing violence, that if violence is a factor, a regular factor, an endemic factor of these countries, then we have to take that into account. So you can look at the failures of the United States, for example, in Iraq from this standpoint. The first thing the Americans wanted to do was create a market society with democracy. And so elections very quickly were organized in the long term we now know without great success. And part of the problem I think is the absence of thinking about the problem of the nature of the three different groups, the Sunnis, the Shi'as, and the Kurds, in terms of different groups that each of which have various forms of violence potential and trying to solve the nature of the problems that they have together so that they have incentives to cooperate as groups rather than trying to form a modern democracy. So one of the things that the United States might have done very differently in 2003, 2004, and 2005, that is the very early stages of reform, is create a system whereby the rents from the oil are divided among the three groups and where the continual maintenance of the rents for each group depends upon cooperating in peace so that there was some mechanism to stop the flow of rents if there were violence and thereby give them incentives to cooperate and form institutions of their own for cooperation rather than go straight to a modern democracy. Taking into account the problem of violence I think gives us a new way of thinking about the problem of development and as a consequence I think that there are many new insights that may allow us if not to solve the problem of development at least to mitigate the problem of violence and by mitigating the problem of violence you lower the effect of the risk of violence and hence make economic activity much more profitable. Whereas in the last 50 years the dominant perspective of development which has dominated the nature of the aid community say the United States Agency for International Development, the USAID, the World Bank, the IMF, the European Bank for Reconstruction and Development all of these have used the standard approach to economics and have not thought seriously about the nature of violence and I think that this has produced too few success stories and I think part of the problem is violence and so I think that there is a great promise in thinking more seriously about violence because it holds the promise of alternative routes for reform.