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The market for protection and the origin of the state

  • Kai Konrad

    ()

  • Stergios Skaperdas

    ()

We examine a stark setting in which security or protection can be provided by self-governing groups of by for-profit entrepreneurs: kings, lords, or mafia dons. Though self-governance is best for the population, it faces problems of long-term viability. Typically, in providing security the stable 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 or lower than in the absence of a state.

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File URL: http://hdl.handle.net/10.1007/s00199-010-0570-x
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Article provided by Springer & Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 50 (2012)
Issue (Month): 2 (June)
Pages: 417-443

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Handle: RePEc:spr:joecth:v:50:y:2012:i:2:p:417-443
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