The economics of violence in natural states

- Violence is key to understanding human interaction and societal development.
- In the natural state of societies, an elite coalition forms that restrains violence.
- We highlight key mechanisms underlying such natural states.
- Aggregate levels of appropriation by a taxing elite and roving warlords are high.
- They can prosper only when the elite is small but is still able to provide order.

Violence is key to understanding human interaction and societal development. The natural state of societal organization is that a subset of the population, capable of mustering organized large-scale violence, forms an elite coalition that restrains both violence and coercive appropriation. We highlight key mechanisms underlying such natural states. Our results show that natural states either have a large elite coalition and a high tax rate, or a weak elite and a high level of appropriation by a large group of violence specialists outside the elite, termed warlords. When output elasticity of effort is high, it induces elite members to limit their tax rate, which in turn promotes warlordism. Only when the elite coalition is small but still able to control a sizeable share of production, as a result of its cooperative quality and a low decisiveness of conflict between elite and warlords, do we find comparatively high levels of production and producer welfare. Our results imply that almost all natural states experience continuous coercion exercised by elite members and violence between elite coalitions and warlords. We show that this is not a temporary out-of-equilibrium-situation but a permanent phenomenon, as can most conspicuously be observed in parts of Sub-Saharan Africa. Our model thus illustrates the rigidity of natural states.