Abstract
While the distinction between public and private goods is essential in developing a normative theory of non-predatory states, the focus of this article is on a positive theory of predatory states. Since the predatory relationship between the state and its subjects depends on the power of the state to grab or to appropriate coercively and the subject’s ability to escape or hide, the boundaries of the state are decided by the nature of the assets that can be taken more or less easily. Accordingly, I will introduce a new distinction between captive and fugitive assets that positively captures the frontiers of a state space. The US railroading in the nineteenth century provides an illustration regarding the explanatory power of an asset-appropriating perspective of the state compared to a public goods approach.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Samuelson (1954) referred to ‘collective consumption goods’ versus ‘private consumption goods’, but Desmarais-Tremblay (2014) argued that the two dimensions of public goods already were adumbrated by Musgrave in 1939. Later, Musgrave (1969) formulated the ‘free-riding’ problem as an explanation for market failure in the case of public goods, and Musgrave and Musgrave (1973) originally conceived a two-by-two table as a pedagogical device for classifying different families of goods based on the possibility of satisfying both or only one of two criteria: non-rivalrous and non-excludability.
While the amendment imposed two requirements for ‘takings’, namely ‘public use’ and ‘just compensation’, to tame the ‘despotic power’ of the state (Miceli and Segerson 2014), the evolution of the interpretation of the Fifth Amendment actually illustrates the predatory nature of the state and the inability to constrain predation in the long term (see Epstein 1985; Paul 1988; Jones 2000; Benson 2008).
The title of James Scott’s book (1998), Seeing Like a State, is clearly relevant to what I suggest below in distinguishing the booty value of an asset (as seen by a state) from the economic value of the same asset in a consensual relationship.
In organization theory, ‘appropriation’ often refers to post-contractual opportunist behavior within voluntary transactions (Klein et al. 1978). This type of ‘appropriative’ activity does not fall within the scope of involuntary (coercive) transactions.
For a detailed critical survey of this school, see Vahabi (2011).
See also Hodgson’s (2015) trenchant critique of Barzel’s confusing distinction between economic and legal property rights.
A good illustration is the way Germany’s Fascist state robbed Jews (1933–1945) (Dean 2008). The Nazi authorities tried to seize not only all Jewish property but also to give those confiscations at least a veneer of legality. Hence, robbing the Jews proceeded in two steps: (1) Aryanization of the economy; (2) the confiscation of Jewish property by the state. Aryanization preceded and prepared the way for ‘legal’ confiscation, converting various forms of Jewish wealth into bank accounts or investments that could be assessed accurately by the German Ministry of Finance and then easily confiscated by the state. According to Hodgson’s definition of property rights, the Jews’ properties had to be regarded as their ‘possessions’ and the ‘property’ of the state’s looters as soon as the Fascist state adopted the Jewish confiscation law. This legalistic interpretation is misleading since it mystifies the state.
I owe this distinction between ‘invisibility’ and ‘the ease to be hidden’ to one of the referees. As the reviewer persuasively argues, cocaine is not invisible but it can be hidden or disguised pretty successfully.
Many scholars in the eighteenth and nineteenth centuries focused on the role of asset mobility; see Hirschman (1970, 1977/2013) for examples from Montesquieu, Sir James Stuart Mill and Adam Smith, defining money, notes, bills of exchange, equity shares of companies, ships, all commodities and merchandises as ‘movable assets’ that could escape from tyranny. Hirschman (1978) also cited Turgot regarding the role of the emigration of persons in addition to physical capital in enhancing democracy. Bates and Lien (1985) added several other scholars, including Quesnay, Mirabeau and Marx, the latter stating that capital was the most mobile factor of production.
Although Williamson (1976) emphasized complementarity between the two theories in comparing markets and firms (hierarchies), he referred to certain differences in their backgrounds and orientations: “The antecedent tradition on which EVL [Exit, Voice and Loyalty] relies is a mixture of politics and economics, the former of which is rather diffuse” (Williamson 1976, p. 371). Later, he delineated the frontiers between markets and hierarchies (Williamson 1985).
Angell (1910/2012, p. 2) devoted a whole chapter to the impossibility of confiscation, writing: “If credit and commercial contract are tampered with in an attempt at confiscation, the credit-dependent wealth is undermined, and its collapse involves that of the conqueror; so that if conquest is not to be self-injurious it must respect the enemy’s property, in which case it becomes economically futile.”
The frontier between ‘movable’ and ‘unmovable’ is not rigid. A previously unmovable asset can transform into a movable one depending on the level of technological, organizational and institutional change. Currently, equipment can ‘emigrate’ overnight from one country to another to take advantage of cheaper labor costs if the government permits it and does not expropriate the underlying assets. Physical capital investments like human capital assets increasingly are becoming movable, but even in this era of globalization, physical capital is less movable than liquid capital.
I prefer Williamson’s (1985) definition: specificity does not only refer to an asset’s physical quality, but also to contractual relationships.
Fugitive assets should not be confused with ‘fugitive property’, a term employed by legal scholars to define resources that have no definite boundaries and are not easily identified. Examples of fugitive property are water, natural gas, underground deposits of crude oil and wild animals. These assets should be put under ‘restraint’ before ownership can be claimed. Consequently, it is difficult to determine who has property rights over them. The legal system is confronted with issues concerning the trade-off between the costs of administrating these property rights and the benefits of having these property rights clearly defined and delineated (Cooter and Ulen 2012, chap. 5, pp. 119–126; 128–138). In our theoretical framework, fugitive assets capture both mobility and non-appropriability. For example, oil and other minerals are regarded as captive and not fugitive assets. Best’s work (2004) provides a literally critical appraisal of legal formalism concerning the disputes over the rendition of fugitive slaves and underlines the role of personhood to property.
Scott (2009, op.cit.) calls these crops, ‘escape crops.’ In fact, ‘fugitive assets’ broaden the scope of this category to assets in general.
A detailed study of different components of conversion costs is beyond the scope of the present article. For an analysis of different components of ‘conversion costs’, see Vahabi (2016, chap. 6).
Williamson (1985) referred to these as ‘bilateral monopoly’ and handled them as ‘holdup’ cases.
Although some people consider the land grants to railroads as massive handouts or subsidies, one could interpret the outcome as a form of mass privatization of land, one maybe even consistent with Lockean homesteading of previously unused land. While the two first interpretations are valid, the last one is more apologetic with regard to the seizure of land from the Native Americans.
For example, in Beekman v, Saratoga & Schenectady R.R. Co. (N.Y. Ch. 1831), a New York court decided that it was “the province of the legislature to determine whether the benefit to the public warranted taking private property” (Ibid).
Despite a widespread belief, the invention of a ‘mass army’ (levée de masse) is not attributable to the French Revolution: “the magnitude of the influence of the French Revolution and Napoleonic era on army size and mobilization was relatively small” (Onorato et al. 2014, p. 453). The authors’ detailed statistical data and econometric tests with regard to army size and military mobilization indicate that the peak Napoleonic army size was 2.2 times larger than it had been in 1747 (the peak date for War of Austrian Succession), and peak Napoleonic mobilization was 1.6 times larger than in that same year (Ibid, p. 475), whereas the size of the military in 1918 was 6.6 times larger than in 1812; the multiplier for mobilization was six. They demonstrate that this colossal increase was directly related to the use of railroads (see pp. 473–476). They also provide an exhaustive list of French historians who have underlined the undeniable impact of railroading in creating mass armies in France as well as explaining its failure in Franco-Prussian war owing to deficient railroads use.
For having a glimpse at the ‘domestication’ of the native Indian through Reservation to Reorganization, see Takaki (1993, chap. 9).
For a more detailed historical narrative concerning New Mexico’s sheep industry, see Carlson (1969).
In addition to political entrepreneurs like John Muir, the railroads also are responsible for developing another so-called ‘public good’, the National Parks (Runte 2010). That story also deserves to be investigated in more detail in the future.
References
Acemoglu, D., & Robinson, J. (2006). Economic origins of dictatorship and democracy. Cambridge: Cambridge University Press.
Adler, W., & Polsky, A. (2010). Building the new American nation: Economic development, public goods, and the early US Army. Political Science Quarterly, 125(1), 87–110.
Anderson, T., & Hill, P. (2004). The not so wild, wild west: Property rights on the frontier. Stanford: Stanford Economics & Finance.
Anderson, T., & Mc Chesney, F. (1994). Raid or trade? An economic model of Indian-White relations. The Journal of Law and Economics, 37(1), 39–74.
Angell, N. (1910/2012). The great illusion, a study of the relation of military power to national advantage. Memphis: General Books LLC.
Angevine, R. (2004). The railroad and the state, war, politics, and technology in nineteenth-century America. Stanford: Stanford University Press.
Bain, D. (1999). Empire express, building the first transcontinental railroad. New York, London: Viking.
Barzel, Y. (1977). An economic analysis of slavery. Journal of Law and Economics, 20(1), 87–110.
Barzel, Y. (1982). Measurement cost and the organization of markets. Journal of Law and Economics, 25(1), 27–48.
Barzel, Y. (1997). Economic analysis of property rights (2nd ed.). Cambridge: Cambridge University Press.
Barzel, Y. (2002). A theory of the state, economic rights, legal rights, and the scope of the state. Cambridge: Cambridge University Press.
Barzel, Y. (2015). What are ‘property rights’, and why do they matter? A comment on Hodgson’s article. Journal of Institutional Economics, 11(4), 719–723.
Bates, R., & Lien, D. (1985). A note on taxation, development, and representative government. Politics and Society, 14(1), 53–70.
Beck, L. (1990). Tribes and the state in 19th- and 20th-century Iran. In P. Khoury & J. Kostiner (Eds.), Tribes and state formation in the Middle-East (pp. 185–222). Berkeley: University of California Press.
Benson, B. (1999). An economic theory of the evolution of governance and the emergence of the state. Review of Austrian Economics, 12, 131–160.
Benson, B. (2008). The evolution of eminent domain power: A remedy for market failure or an effect to limit government power and government failure. Independent Review, 12(3), 423–432.
Best, S. (2004). The fugitive’s properties: Law and the poetics of possession. Chicago: Chicago University Press.
Boix, C. (2003). Democracy and redistribution. Cambridge, UK: Cambridge University Press.
Boulding, K. (1960). Conflict and defense, a general theory. New York, Evanston and London: Harper and Row Publishers.
Caplan, B. (2001). Standing Tiebout on his head: Tax capitalization and the monopoly power of local governments. Public Choice, 108(1/2), 101–122.
Carlson, A. (1969). New Mexico’s sheep industry, 1850–1900: Its role in the history of the territory. New Mexico Historical Review, 44(1), 25–49.
Clark, W., & McGirr, S. (2010). Asset specificity, inequality, and limited government. In American Political Science Association 2010, Annual Meeting.
Coase, R. (1974). The lighthouse in economics. Journal of Law and Economics, 17(2), 357–376.
Cole, D., & Grossman, P. (2002). The meaning of property rights: Law versus economics? Land Economics, 78(3), 317–330.
Connolly, R. (2012). The economic sources of social order development in post-Socialist Eastern Europe. London, New York: Routledge.
Cooter, R., & Ulen, T. (2012). Law and economics (6th ed.). Boston: Addison-Wesley.
De Long, B., & Shleifer, A. (1993). Prices and merchants: European city growth before the industrial revolution. Journal of Law and Economics, 36(2), 671–702.
Dean, M. (2008). Robbing the Jews, the confiscation of Jewish property in the Holocaust, 1933–1945. New York: Cambridge University Press.
Demsetz, H. (1964). The exchange and enforcement of property rights. Journal of Law and Economics, 7, 11–26.
Desmarais-Tremblay, M. (2014). On the definition of public goods, assessing Richard A. Musgrave’s contribution. Paris: Documents de Travail du Centre d’Economie de la Sorbonne, Université Paris 1.
Domar, E. (1970). The causes of slavery or serfdom: a hypothesis. The Journal of Economic History, 30(1), 18–32.
Ellickson, R. (1991). Order without law, how neighbors settle disputes. Cambridge: Harvard University Press.
Ellickson, R. (1993). Property in land. Yale Law Journal, 102, 1317–1400.
Ely, J. (2003). Can the “despotic power” be tamed? Reconsidering the public use limitation on eminent domain. In Probate and property, 31–36 November/December.
Epstein, R. (1985). Takings, private property and the power of eminent domain. Cambridge, London: Harvard University Press.
Evans, P. (1989). Predatory, developmental, and other apparatuses: A comparative political economy perspective on the Third World state. Sociological Forum, 4(4), 561–587.
Fogel, R. (1964). Railroads and American economic growth, essays in econometric history. Baltimore: John Hopkins Press.
Freeman, J., & Quinn, D. (2012). The economic origins of democracy reconsidered. American Political Science Review, 106(1), 58–80.
Friedman, D. (1977). A theory of the size and shape of nations. Journal of Political Economy, 85(1), 59–77.
Giffel, F. (2009). Al-Ghazali’s philosophical theology. Oxford, New York: Oxford University Press.
Herrera, G. (2006). Technology and international transformation, the railroad, the atom bomb, and the politics of technological change. New York: State University of New York Press.
Hirschman, A. (1970). Exit, voice, and loyalty. Cambridge: Cambridge University Press.
Hirschman, A. (1977/2013). The passions and the interests, political arguments for capitalism before its triumph. Princeton, Oxford: Princeton University Press.
Hirschman, A. (1978). Exit, voice, and the state. World Politics, 31(1), 90–107.
Hodgson, G. (2015). Much of the ‘economics of property rights’ devalues property and legal rights. Journal of Institutional Economics, 11(4), 683–709.
Hohfeld, W. (1913). Some fundamental legal conceptions as applied in judicial reasoning. Yale Law Journal, 23, 16–59.
Holcombe, R. (1994). The economic foundations of government. New York: New York University Press.
Holcombe, R. (2004). Government: Unnecessary but inevitable. Independent Review, 8(3), 325–342.
Jones, S. (2000). Trumping eminent domain law: An argument for strict scrutiny analysis under the public use requirement of the Fifth Amendment. Syracuse Law Review, 50, 285–314.
Kautsky, K. (1903). The social revolution, Vol. II: On the day after the social revolution. Translated by A.M & May Wood Simmons and Sally Ryan, Charles Kerr & Co. http://www.marxists.org/archive/kautsky/1902/socrev/. Accessed Sept 2015.
Kelley, K., & Francis, H. (2001). Many generations, few improvements: “Americans” challenge Navajos on the transcontinental railroad Grant, Arizona, 1881–1887. American Indian Culture and Research Journal, 25(3), 73–101.
Klein, B., Crawford, R., & Alchian, A. (1978). Vertical integration, appropriable rents, and the competitive contracting process. Journal of Law and Economics, 21(2), 297–326.
Kurrild-Klitgaard, P., & Svendsen, G. (2003). Rational bandits: Plunder, public goods, and the Vikings. Public Choice, 117(3), 255–272.
Lane, F. (1958/1979). Economic consequences of organized violence. In F. Lane (Ed.), Profit from power (pp. 50–65). New York: State University of New York.
Le Billon, P. (2001). The political ecology of war: Natural resources and armed conflicts. Political Geography, 20, 561–584.
Leeson, P. (2007). Efficient anarchy. Public Choice, 130(1), 41–53.
Leeson, P. (2011). Government, clubs, and constitutions. Journal of Economic Behavior and Organization, 80, 301–308.
Leeson, P., & Williamson, C. (2009). Anarchy and development: An application of the theory of second best. The Law and Development Review, 2(1), 76–96.
Lemke, J. (2016). Interjurisdictional competition and the married women’s property acts. Public Choice, 166, 291–313.
Lenin, V. (1921/1965). The tax in kind, the significance of the new policy and its conditions. Collected works (Vol. 32, pp. 329–365). Moscow: Progress Publishers. https://www.marxists.org/archive/lenin/works/1921/apr/21.htm.
Levi, M. (1988). Of rule and revenue. Berkeley: University of California Press.
McGuire, J., & Olson, M. (1995). The economics of autocracy and majority rule: The invisible hand and the use of force. Journal of Economic Literature, 34, 72–96.
Miceli, T., & Segerson, K. (2014). Takings. In J. Backhaus (Ed.), Encyclopedia of law and economics. Springer.com/SpringerReference, ISBN: 978-1-4614-7883-6 (online).
Musgrave, R. (1969). Provision for social goods. In J. Margolis & H. Guitton (Eds.), Public economics: An analysis of public production and consumption and their relations to the private sector. London: Macmillan.
Musgrave, R., & Musgrave, P. (1973). Public finance in theory and practice (1st ed.). New York: McGraw Hill.
North, D. (1981). Structure and change in economic history. New York, London: W.W. Norton and Company.
North, D. (1990). Institutions, institutional change, and economic performance. New York: Cambridge University Press.
Olson, M. (1982). The rise and decline of nations: Economic growth, stagflation, and social rigidities. New Haven: Yale University Press.
Onorato, M., Scheve, K., & Stasavage, D. (2014). Technology and the era of the mass army. Journal of Economic History, 74(2), 449–481.
Pagano, U. (2014). The crisis of intellectual monopoly capitalism. Cambridge Journal of Economics, 38(6), 1409–1429.
Paul, E. (1988). Property rights and eminent domain. New Brunswick: Transactions Books.
Pietri, A., Tazdaït, T., & Vahabi, M. (2016). The Economics of empire-building: Predatory and price competitions. Journal of Institutional and Theoretical Economics, 173 (forthcoming).
Powell, B., & Stringham, E. (2009). Public choice and the economic analysis of anarchy: A survey. Public Choice, 140(3), 503–538.
Richter, A. (2005). Home on the rails: Women, the railroad, and the rise of public domesticity. Chapel Hill: University of North Carolina Press.
Rogowski, R. (1998). Democracy, capital, skill, and country size, effects of asset mobility and regime monopoly on the odds of democratic rule. In P. Drake & M. McCubbins (Eds.), The origins of liberty, political and economic liberalization in the modern world (pp. 48–69). Princeton: Princeton University Press.
Ross, M. (2004). What do we know about natural resources and civil war? Journal of Peace Research, 41(3), 337–356.
Runte, A. (2010). National parks: The American experience (4th ed.). Lanham Md.: Taylor Trade Pub.
Samuelson, P. (1954). The pure theory of public expenditure. Review of Economics and Statistics, 36(4), 387–389.
Saturday Review of Politics, Literature, Science and Art (1883). The American railway system. March 3 (pp. 276–277).
Scott, J. (1998). Seeing like a state, how certain schemes to improve the human condition have failed. New Haven, London: Yale University Press.
Scott, J. (2009). The art of not being governed, an Anarchist history of upland Southeast Asia. New Haven, London: Yale University Press.
Snyder, R. (2006). Does lootable wealth breed disorder? A political economy of extraction framework. Comparative Political Studies, 39(8), 943–968.
Stringham, E. (2015). Private governance, creating order in economic and social life. Oxford, New York: Oxford University Press.
Sutton, R. (1966). The origins of American land-grant railroad rates. Business History Review, 40(1), 66–76.
Takaki, R. (1993). A different mirror, a history of multicultural America (pp. 228–245). Boston, New York, Toronto, London: Little, Brown and Company.
Tiebout, C. H. (1956). A pure theory of local expenditures. Journal of Political Economy, 64(5), 416–424.
Utley, R. (1967). Frontiersmen in blue: The United States Army and the Indian, 1848–1865. New York: Macmillan.
Vahabi, M. (2011). Appropriation, violent enforcement and transaction costs: A critical survey. Public Choice, 147(1), 227–253.
Vahabi, M. (2016). The political economy of predation: Manhunting and the economics of escape. New York: Cambridge University Press.
Volckart, O. (2000). The open constitution and its enemies: Competition, rent Seeking, and the rise of the modern state. Journal of Economic Behavior and Organization, 42, 1–17.
Williamson, O. (1976). The Economics of internal organization: Exit and voice in relation to markets and hierarchies. The American Economic Review, 66(2), 369–377.
Williamson, O. (1985). The Economic institutions of capitalism Firms, markets, relational contracting. New York: Free Press.
Acknowledgments
I wholeheartedly thank my three anonymous referees, the associate editor Peter Kurrild-Klitgaard, and the editor in chief, William Shughart of the Public Choice journal, for their excellent and constructive comments. I would also like to present my gratitude to Bertrand Crettez, Geoffrey Hodgson, Peter Leeson, Sylvie Lupton, Pavel Pelikan, Antoine Pietri, Daniel Smith, Tarik Tazdait, and Mandana Vahabi, for their inspiring and insightful remarks on earlier versions of this paper. Obviously, all the remaining errors are mine.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Vahabi, M. A positive theory of the predatory state. Public Choice 168, 153–175 (2016). https://doi.org/10.1007/s11127-016-0354-3
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11127-016-0354-3