Transition costs in secessions, with a brief application to Scotland

This article demonstrates that the costs incurred in the process of a region becoming a sovereign state can be large enough to outweigh the long-term material benefits of independence. Transition costs consist of transaction costs, fiscal costs, and the cost of uncertainty. Their size depends crucially on whether the politics of the transition are cooperative. Game theory, however, shows that there are incentives for threats of non-cooperation and for the exercise of such threats. These considerations are applied, briefly, to the debate about Scottish independence. This includes a short analysis of how transition costs can be reduced. A final section inquires about possible transition benefits, which can consist of solidarity.