The Paradox of Power Revisited: Internal and External Conflict

Abstract

This paper develops a model of internal and external conflict in which the paradox of power holds for internal conflict, but not for external conflict. In the model, internal conflict is imbedded in a situation of external conflict. Agents in a group fight over the distribution of resources within the group, but they cooperate to fight against other groups. Agents with low economic productivity have an advantage in the internal conflict game because they face a lower opportunity cost for investments in weapons. However, it is easier for more productive groups to mobilize resources for external conflict, and as a result they have an advantage over less productive groups. The model helps to explain why economically unproductive kings enjoyed high living standards relative to their more productive subjects, but more developed kingdoms defeated and conquered less developed ones. The model can be extended to study the effects of trade on the intensity of the paradox of power and income distribution within and across groups. Extension of the model also shows that groups with more unequal distribution of productivity might have an advantage in external conflict.

Keywords: conflict, paradox of power, trade

JEL Classification: D74, F10, F50