The Market for Protection and the Origin of the State

34 Pages Posted: 21 Nov 2005

See all articles by Kai A. Konrad

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Stergios Skaperdas

University of California - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 2005

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.

Keywords: property rights, anarchy, government

JEL Classification: D30, D70, H10

Suggested Citation

Konrad, Kai A. and Skaperdas, Stergios, The Market for Protection and the Origin of the State (October 2005). CESifo Working Paper Series No. 1578, Available at SSRN: https://ssrn.com/abstract=852524 or http://dx.doi.org/10.2139/ssrn.852524

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, 53072
Germany

Stergios Skaperdas (Contact Author)

University of California - Department of Economics ( email )

3123 Social Science Plaza A
Irvine, CA 92697-5100
United States
714-824-4167 (Phone)
714-824-2182 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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