The Market for Protection and the Origin of the State
34 Pages Posted: 21 Nov 2005
Date Written: October 2005
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.
Keywords: property rights, anarchy, government
JEL Classification: D30, D70, H10
Suggested Citation: Suggested Citation