The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force

The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force
Working paper
Martin McGuire, Mancur Olson, Jr.
August 1994

Suppose that the leader of a group of roving bandits in an anarchic environment can seize and hold some territory. If the bandit leader becomes a settled ruler with a definite and secure domain. it will pay him to limit the rate of his theft and to provide a peaceful order and other public goods in that domain. In an anarchic environment, there is little incentive for people to invest or produce and. therefore. not much for bandits to steal. But, by choosing a rate of tax-theft that leaves a considerable incentive for his victims to produce and by providing a peaceful order and other public goods, the settled ruler can bring about a great increase in output, and out of this increase obtain more resources for his own purposes than from roving banditry.

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