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Proprietary Public Finance: On its Emergence and Evolution out of Anarchy

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  • Stergios Skaperdas

Abstract

Proprietary rule, whereby the state is owned by a ruler who maximizes tax revenues minus the costs of governing, is a useful ideal type that describes many of the states that have ever existed. The study of proprietary rule and its public finance, however, is comparatively scarce. I argue that proprietary rule emerges out of anarchy and its main alternative - self-governance - has difficulties surviving because of problems in providing effective internal and external security. Competitive proprietary rule (or, organized anarchy) is the market structure for the provision of security that is more stable, but is highly inefficient because all the savings that come out of the public provision of security are dissipated into contests for power among proprietary rulers. I also explore how competitive proprietary rule can be consolidated into more complex forms of governance.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3495.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3495

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  1. Merwan Engineer, 1986. "Taxes, Public Goods and the Ruling Class," Working Papers 672, Queen's University, Department of Economics.
  2. Grossman, Herschel I. & Noh, Suk Jae, 1994. "Proprietary public finance and economic welfare," Journal of Public Economics, Elsevier, vol. 53(2), pages 187-204, February.
  3. Michael McBride & Gary Milante & Stergios Skaperdas, 2009. "Peace and War with Endogenous State Capacity," Working Papers 091002, University of California-Irvine, Department of Economics.
  4. Moselle, Boaz & Polak, Benjamin, 2001. "A Model of a Predatory State," Journal of Law, Economics and Organization, Oxford University Press, vol. 17(1), pages 1-33, April.
  5. Michael McBride & Stergios Skaperdas, 2009. "Conflict, Settlement, and the Shadow of the Future," Working Papers 080922, University of California-Irvine, Department of Economics.
  6. Luis Corchon & Matthias Dahm, 2007. "Foundations For Contest Success Functions," Economics Working Papers we070401, Universidad Carlos III, Departamento de Economía.
  7. Ostrom, Elinor, 2009. "Beyond Markets and States: Polycentric Governance of Complex Economic Systems," Nobel Prize in Economics documents 2009-4, Nobel Prize Committee.
  8. Genicot, C. & Skaperdas, S., 2000. "Investing in Confict Management," Papers 00-01-17, California Irvine - School of Social Sciences.
  9. Birendra K. Rai & Rajiv Sarin, 2007. "Generalized Contest Success Functions," Jena Economic Research Papers 2007-082, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  10. Martin C. McGuire & Mancur Olson Jr., 1996. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 72-96, March.
  11. Ronald Findlay, 1990. "THE NEW POLITICAL ECONOMY: ITS EXPLANATORY POWER FOR LDCs," Economics and Politics, Wiley Blackwell, vol. 2(2), pages 193-221, 07.
  12. Wintrobe,Ronald, 2000. "The Political Economy of Dictatorship," Cambridge Books, Cambridge University Press, number 9780521794497, October.
  13. Avner Greif, 1997. "Self-enforcing Political System and Economic Growth: Late Medieval Genoa," Working Papers 97037, Stanford University, Department of Economics.
  14. James M. Buchanan & Richard A. Musgrave, 1999. "Public Finance and Public Choice: Two Contrasting Visions of the State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262024624, December.
  15. Robert H. Bates & Avner Greif & Margaret Levi & Jean-Laurent Rosenthal, 1998. "Analytic Narratives," Economics Books, Princeton University Press, edition 1, volume 1, number 6355.
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