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The Market for Protection and the Origin of the State

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  • Kai A. Konrad
  • Stergios Skaperdas

Abstract

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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  • Kai A. Konrad & Stergios Skaperdas, 2005. "The Market for Protection and the Origin of the State," CESifo Working Paper Series 1578, CESifo.
    • Handle: RePEc:ces:ceswps:_1578
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    Keywords

    property rights; anarchy; government;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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