Abstract
We examine a stark setting in which security or protection can be provided by self-governing groups or by for-profit entrepreneurs (kings, kleptocrats, or mafia dons). Although self-governance is best for the population, it faces problems of long-term viability. Typically, in providing security, the equilibrium market structure involves competing lords, a condition that leads to a tragedy of coercion: all the savings from the provision of collective protection are dissipated and welfare can be as low as, or even lower than, in the absence of the state. Thus, we explain the tendency towards autocracy both in history, before the appearance of modern representative governance, and in many low-income countries in modern times.
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A previous draft of this paper was circulated under the title “What Kind of Order Out of Anarchy? Self-Governance, Autocracy and Predatory Competition.” For helpful comments, we would like to thank seminar participants in a number of venues as well as Herschel Grossman, Jack Hirshleifer, Mike Munger, Debraj Ray, and three anonymous referees.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Konrad, K.A., Skaperdas, S. The market for protection and the origin of the state. Econ Theory 50, 417–443 (2012). https://doi.org/10.1007/s00199-010-0570-x
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DOI: https://doi.org/10.1007/s00199-010-0570-x