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Trading with Bandits

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  • Peter T. Leeson

Abstract

Is it possible to trade with bandits? When government is absent, the superior strength of some agents makes it cheaper for them to violently steal what they desire from weaker agents than to use trade to obtain what they want. Such was the case with middlemen who interacted with producers in late precolonial west central Africa. In the face of this threat, producers employed two mechanisms to make exchange with middlemen possible. On the one hand, they used credit to alter middlemen’s cost-benefit structure of engaging in plunder versus trade. On the other hand, producers demanded tribute from traveling traders as a risk premium. By transforming traveling traders’ incentive from banditry to peaceful trade and reducing producers’ costs associated with interacting with middlemen, these mechanisms enhanced both parties’ ability to capture the gains from exchange.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/511320
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Bibliographic Info

Article provided by University of Chicago Press in its journal The Journal of Law and Economics.

Volume (Year): 50 (2007)
Issue (Month): ()
Pages: 303-321

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Handle: RePEc:ucp:jlawec:v:50:y:2007:p:303-321

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Web page: http://www.journals.uchicago.edu/JLE/

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Citations

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Cited by:
  1. Peter Leeson, 2008. "Coordination without command: Stretching the scope of spontaneous order," Public Choice, Springer, vol. 135(1), pages 67-78, April.
  2. Leeson, Peter T. & Boettke, Peter J., 2009. "Two-tiered entrepreneurship and economic development," International Review of Law and Economics, Elsevier, vol. 29(3), pages 252-259, September.
  3. Russell S. Sobel & Christopher J. Coyne, 2011. "Cointegrating Institutions: The Time-Series Properties of Country Institutional Measures," Journal of Law and Economics, University of Chicago Press, vol. 54(1), pages 111 - 134.
  4. Leeson, Peter T., 2011. "Government, clubs, and constitutions," Journal of Economic Behavior & Organization, Elsevier, vol. 80(2), pages 301-308.
  5. Adam C. Smith & David B. Skarbek & Bart J. Wilson, 2009. "Anarchy, Groups, and Conflict: An Experiment on the Emergence of Protective Associations," Working Papers 09-03, Chapman University, Economic Science Institute.
  6. Boettke, Peter, 2011. "An anarchist’s reflection on the political economy of everyday life," MPRA Paper 33067, University Library of Munich, Germany.
  7. Powell, Benjamin & Stringham, Edward, 2009. "Public choice and the economic analysis of anarchy: a survey," MPRA Paper 26097, University Library of Munich, Germany.
  8. Kai Konrad & Wolfgang Leininger, 2011. "Self-enforcing norms and efficient non-cooperative collective action in the provision of public goods," Public Choice, Springer, vol. 146(3), pages 501-520, March.
  9. Boettke, Peter, 2011. "Anarchism and Austrian economics," MPRA Paper 33069, University Library of Munich, Germany.
  10. Claudia Williamson, 2009. "Informal institutions rule: institutional arrangements and economic performance," Public Choice, Springer, vol. 139(3), pages 371-387, June.
  11. Stringham, Edward Peter, 2011. "Embracing morals in economics: The role of internal moral constraints in a market economy," Journal of Economic Behavior & Organization, Elsevier, vol. 78(1), pages 98-109.
  12. Claudia Williamson & Rachel Mathers, 2011. "Economic freedom, culture, and growth," Public Choice, Springer, vol. 148(3), pages 313-335, September.
  13. Tereza Šímová & Josef Šíma, 2012. "In Search Of Empirical Content – The Austrian Way To Go Beyond Pure Theory," Romanian Economic Business Review, Romanian-American University, vol. 7(1), pages 50-59, March.
  14. Stringham, Edward Peter & Zywicki, Todd J., 2011. "Hayekian anarchism," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 290-301, May.
  15. Leeson, Peter T. & Nowrasteh, Alex, 2011. "Was privateering plunder efficient?," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 303-317, August.
  16. Edward Stringham & Todd Zywicki, 2011. "Rivalry and superior dispatch: an analysis of competing courts in medieval and early modern England," Public Choice, Springer, vol. 147(3), pages 497-524, June.
  17. Leeson, Peter T., 2010. "Rational choice, Round Robin, and rebellion: An institutional solution to the problems of revolution," Journal of Economic Behavior & Organization, Elsevier, vol. 73(3), pages 297-307, March.
  18. Peter Leeson, 2007. "Efficient anarchy," Public Choice, Springer, vol. 130(1), pages 41-53, January.

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