IDEAS home Printed from
   My bibliography  Save this paper

Seeking Protection and the Origin of the State


  • Allen Wilhite


Consider a simple world populated with two kinds of individuals, those who work and create wealth (peasants) and those who survive by taking the property of others (bandits). The presence of bandits creates an incentive for peasants to seek protection, to defend their property. But protection is costly; it consumes resources and interferes with an individual's ability to create wealth. This study will investigate how individuals might make decisions in such circumstances, how those decisions evolve over time, and how broader societal characteristics can emerge from such decisions. Every agent decides to be a peasant or a bandit and if peasantry is chosen, he decides how much to invest in protection. A critical issue is that peasants can engage in self-protection or they can pool their resources to create some social or communal protection. Private protection has benefits that accrue solely to that individual while public or social protection provides benefits to all members of the society. In addition communal protection is assumed to have a different, and superior, technology, but since its benefits are public, there is an incentive to free ride. A central theme of this project is, "Under what circumstances do peasants overlook the free riding possibilities to cooperate and form communities that invest in social protection?" Decisions follow an evolutionary path rather than arising from agents intentionally maximizing an objective function. In other words, these agents do not "do the math" to determine their optimal contributions to private and public protection. Instead decisions change over time as agents observe their position or satisfaction relative to others. This evolutionary procedure leads to a simple and natural decision process. The least successful agents (those whose choices rendered them least fit) have the greatest incentive to change what they are doing. While being over simplified, this process reflects decision-making observed in everyday life. Many individuals gauge their "success" relative to others and make decisions based on their relative position. This study will proceed with a series of experiments performed on a variety of artificial societies. In some cases a spatial dimension will introduce neighborhood effects, i.e., agents may be influenced by the decisions of other, nearby agents. In some models individuals find the ability to coerce others to contribute to social protection. In others the number and size of communities will be endogenously determined allowing for the emergence of smaller communities that can more closely police free riding. We are ultimately interested in the aggregate attributes of these societies, the dynamic behavior of agents, and whether some regimes lead to emergent communities that adopt a positive level of social protection; what we call the emergence of a state. Specific attributes of interest in these societies include: (i) the number of bandits and peasants in the population; (ii) the expenditure on protection (the amount of rent-seeking or non-productive activities); (iii) aggregate output (GDP) or per capita output; (iv) the dispersion of criminal activity; and (v) the number and size of any emergent communities.

Suggested Citation

  • Allen Wilhite, 2001. "Seeking Protection and the Origin of the State," Computing in Economics and Finance 2001 69, Society for Computational Economics.
  • Handle: RePEc:sce:scecf1:69

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. Dietmar P.J. Leisen and Kenneth L. Judd, 2001. "A Partial Equilibrium Model of Option Markets," Computing in Economics and Finance 2001 219, Society for Computational Economics.
    2. Detemple, Jerome B & Selden, Larry, 1991. "A General Equilibrium Analysis of Option and Stock Market Interactions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(2), pages 279-303, May.
    3. Drees, Burkhard & Eckwert, Bernhard, 1995. " The Risk and Price Volatility of Stock Options in General Equilibrium," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 459-467, September.
    4. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters,in: Theory Of Valuation, chapter 8, pages 229-288 World Scientific Publishing Co. Pte. Ltd..
    5. Guntar Franke & Richard C. Stapleton & Marti G. Subrahmanyam, 1999. "When are Options Overpriced? The Black-Scholes Model and Alternative Characterizations of the Pricing Kernel," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-003, New York University, Leonard N. Stern School of Business-.
    6. Franke, Gunter & Stapleton, Richard C. & Subrahmanyam, Marti G., 1998. "Who Buys and Who Sells Options: The Role of Options in an Economy with Background Risk," Journal of Economic Theory, Elsevier, vol. 82(1), pages 89-109, September.
    7. Brennan, M J, 1979. "The Pricing of Contingent Claims in Discrete Time Models," Journal of Finance, American Finance Association, vol. 34(1), pages 53-68, March.
    8. Leland, Hayne E, 1980. " Who Should Buy Portfolio Insurance?," Journal of Finance, American Finance Association, vol. 35(2), pages 581-594, May.
    9. Guenter Franke & Richard C. Stapleton & Marti G. Subrahmanyam, 1999. "When are Options Overpriced? The Black-Scholes Model and Alternative Characterisations of the Pricing Kernel," Finance 9904004, EconWPA.
    10. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, January.
    11. Bailey, Warren & Stulz, René M., 1989. "The Pricing of Stock Index Options in a General Equilibrium Model," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(01), pages 1-12, March.
    12. Mark Rubinstein, 1976. "The Valuation of Uncertain Income Streams and the Pricing of Options," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 407-425, Autumn.
    13. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
    14. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    15. Rubinstein, Mark, 1974. "An aggregation theorem for securities markets," Journal of Financial Economics, Elsevier, vol. 1(3), pages 225-244, September.
    16. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
    Full references (including those not matched with items on IDEAS)

    More about this item


    agent-based decision making; private v. public protection;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sce:scecf1:69. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.