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The Market for Protection and the Origin of the State

  • Kai A. Konrad
  • Stergios Skaperdas

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). Though 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.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1578.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1578
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