Abstract
This paper reconceptualizes and unbundles the relationship between public predation, state capacity and economic development. By reframing our understanding of state capacity theory from a constitutional perspective, we argue that to the extent that a causal relationship exists between state capacity and economic development, the relationship is proximate rather than fundamental. State capacity emerges from an institutional context in which the state is constrained from preying on its citizenry in violation of predefined rules limiting its discretion. When political constraints are not established to limit political discretion, then state capacity will degenerate from a means of delivering economic development to a means of predation. In addition, we investigate two case studies of economic and political transition: the privatization of Russia following the collapse of the Soviet Union; and the political unification of Sicily with the Italian peninsula following the Napoleonic Wars. In each case, political and economic transition intended to secure well-defined and well-enforced property rights empowered the predatory capacity of the state. In each case, the attempt to redistribute property rights through political discretion only facilitated predation by the political elite.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
One potential objection that we should raise is one made by Anthony de Jasay (1985 [1998]), who argued that formal constitutions are either unnecessary because, when effective, they merely reflect the political values already accepted by a society. If constitutional constraints are ineffective, that is because the underlying values and norms of society legitimize the expansion of state power (see Pejovich 2003; Holcombe, forthcoming). However, our use of the word constitution does not necessarily imply a written document, but is broadly “conceived here as the set of institutions governing political decision-making—that is, the institutions or rules governing how policy choices are made, especially among alternative specifications of the economic system. All societies possess a constitution in this sense, whether or not they possess an explicit document called ‘the constitution’” (Weingast 1995, p. 2; emphasis added). Whether they are informal or formal, in order to understand the political decision-making process operating in a society, “the theorist has to assume that some rules already exist and are exogenous for purposes of a particular analysis” (Ostrom 1990, p. 52; emphasis added).
One must not overlook, however, as a matter of positive analysis, the role that ideology plays in legitimizing state predation and, therefore, what the subjects of the state will regard as predation or not (see Holcombe, forthcoming).
As Hayek (1960, p. 154; original emphasis) points out, the “true contrast to a reign of status is the reign of general and equal laws, of the rules which are the same for all, or, we might say, of the rule of leges in the original meaning of the Latin word for laws—leges that is, as opposed to the privi-leges.” Therefore, the meaning of “privilege” can be understood as “private law”, of the use of the law for one’s exclusive benefit, as opposed to a common means utilized for the coordination of the separate ends of individuals. It is in this sense that Buchanan refers to the law being “public capital” (see also Boettke and Candela 2014).
The political unification of Italy, and Sicily’s absorption into what became the Kingdom of Italy, underwent several phases, the first of which was Sicily’s absorption into the Kingdom of the Two Sicilies in 1816, south of the Papal States on the Italian peninsula. After 1861, the Kingdom of the Two Sicilies was absorbed into the Kingdom of Italy.
See also the argument made by Batchelder and Sanchez (2013), which reinforces our point regarding analytic emphasis on initial conditions.
In The Power to Tax, Brennan and Buchanan (1980 [2000]) model the state as a revenue-maximizing Leviathan, but combining Buchanan and Olson, the development puzzle becomes one of finding the institutional configuration wherein the revenue-maximizing strategy for Leviathan is the wealth-maximizing one. That can occur only when the protective and productive state are empowered, and the predatory state is restrained in effective shackles.
As Varese (1994, p. 231) has written, “The monopoly over the means of production during Soviet times meant that autonomous suppliers of private protection did not emerge”.
See also Barzel (1989 [1997], pp. 128–138) for discussion of governmental (non-market) allocation of property rights.
Gambetta (1993, p. 28) argues similarly that the Mafia’s practice is to offer protection in return for withdrawing threats of extortion.
The same point is made by St. Augustine (1887, p. 66) in The City of God, in which he writes the following:
Justice being taken away, what are kingdoms but great robberies? For what are robberies themselves, but little kingdoms? The band itself is made up of men; it is ruled by the authority of a prince, it is knit together by the pact of the confederacy; the booty is divided by the law agreed on. If, by the admittance of abandoned men, this evil increases to such a degree that it holds places, fixes abodes, takes possession of cities, and subdues peoples, it assumes the more plainly the name of a kingdom, because the reality is now manifestly conferred on it, not by the removal of covetousness, but by the addition of impunity. Indeed, that was an apt and true reply which was given to Alexander the Great by a pirate who had been seized. For when that king had asked the man what he meant by keeping hostile possession of the sea he answered with bold pride, ‘What thou meanest by seizing the whole earth; but because I do it with a petty ship, I am called a robber, whilst thou who dost it with a great fleet art styled emperor’.
The report combines the separate accounts of Franchetti, entitled Condizioni politiche e amminstrative della Sicilia (“Political and administrative conditions of Sicily”) and Sonnino, entitled I contandini in Sicilia (“The peasants in Sicily”). All translations for this paper were provided by Rosolino Candela.
Interestingly enough, in The Politics of Bureaucracy Gordon Tullock (1965, p. 68) uses the Kingdom of the Two Sicilies as an example of ineffective bureaucratic administration: “Governments can follow inefficient policies for very long periods of time without being eliminated. The Kingdom of the Two Sicilies, for example, seems to have been governed atrociously for practically the entire period of its existence”.
For more detail on Italy, see Sabetti (1982).
King Ferdinand I previously had been Ferdinand IV of Naples and Ferdinand III of Sicily (Mack Smith 1968, p. 352).
References
Acemoglu, D., García-Jimeno, C., & Robinson, J. A. (2015). State capacity and economic development: A network approach. American Economic Review,105(8), 2364–2409.
Alchian, A. A. (1965). Some economics of property rights. Il Politico,30(4), 816–829.
Anderson, A. (1995). The Red Mafia: A legacy of communism. In E. P. Lazear (Ed.), Economic transition in Eastern Europe and Russia (pp. 340–366). Stanford, CA: Stanford University Press.
Anderson, G. M., & Boettke, P. J. (1993). Perestroika and public choice: The economics of autocratic succession in a rent-seeking society. Public Choice,75(2), 101–118.
Anderson, G. M., & Boettke, P. J. (1997). Soviet venality: A rent-seeking model of the communist state. Public Choice,93(1/2), 37–53.
Augustine, St. (1887). City of God. In Schaff, P., (ed.). A select library of the Nicene and post Nicene fathers of the Christian Church, Vol. II: St. Augustin’s City of God and Christian Doctrine. Buffalo, NY: The Christian Literature Co.
Azam, J. P., Bates, R., & Biais, B. (2009). Political predation and economic development. Economics and Politics,21(2), 255–277.
Backman, C. R. (1995). The decline and fall of medieval Sicily: Politics, religion, and economy in the reign of Frederick III, 1296–1337. New York, NY: Cambridge University Press.
Bandiera, O. (2003). Land reform, the market for protection, and the origins of the Sicilian Mafia: Theory and evidence. Journal of Law Economics and Organization,19(1), 218–244.
Barzel, Y. (1989 [1997]). Economic analysis of property rights (2nd ed.). New York, NY: Cambridge University Press.
Barzel, Y. (2000). Property rights and the evolution of the state. Economics of Governance,1, 25–51.
Barzel, Y. (2002). A theory of the state: economic rights, legal rights, and the scope of the state. New York, NY: Cambridge University Press.
Batchelder, R. W., & Sanchez, N. (2013). The encomienda and the optimizing imperialist: an interpretation of Spanish imperialism in the Americas. Public Choice,156(1/2), 45–60.
Bates, R., Grief, A., & Singh, S. (2002). Organizing violence. The Journal of Conflict Resolution,46(5), 599–628.
Bauer, P. T. (2000). From subsistence to exchange. Princeton, NJ: Princeton University Press.
Benson, B. L. (1999). An economic theory of the evolution of governance and the emergence of the state. The Review of Austrian Economics,12(2), 131–160.
Besley, T., & Persson, T. (2010). State capacity, conflict, and development. Econometrica,78(1), 1–34.
Boettke, P. J. (1993). Why Perestroika failed: The politics and economics of socialist transformation. New York, NY: Routledge.
Boettke, P. J. (1995). Credibility, commitment, and Soviet economic reform. In E. P. Lazear (Ed.), Economic transition in Eastern Europe and Russia (pp. 247–275). Stanford, CA: Stanford University Press.
Boettke, P. J. (2009). Institutional transition and the problem of credible commitment. The Annual Proceedings of the Wealth and Well-Being of Nations,1, 41–52.
Boettke, P. J. (2018). Economics and public administration. Southern Economic Journal,84(4), 938–959.
Boettke, P. J., & Candela, R. (2014). Hayek, Leoni, and law as a fifth factor of production. Atlantic Economic Journal,42(2), 123–131.
Boettke, P. J., & Candela, R. A. (2017a). The liberty of progress: Increasing returns, institutions, and entrepreneurship. Social Philosophy & Policy,34(2), 136–163.
Boettke, P. J., & Candela, R. A. (2017b). Lesson on economics and political economy from the Soviet tragedy. Journal of Global Initiatives: Policy, Pedagogy, Perspective,12(1), 32–47.
Boettke, P. J., Coyne, C. J., Leeson, P. T., & Sautet, F. (2005). The new comparative political economy. The Review of Austrian Economics,18(3/4), 281–304.
Boettke, P. J., & Leeson, P. T. (2003). Is the transition to the market too important to be left to the market? Economic Affairs,23(1), 33–39.
Boettke, P. J., & Nicoara, O. (2015). What have we learned from the collapse of communism? In P. J. Boettke & C. J. Coyne (Eds.), The Oxford handbook of Austrian Economics (pp. 643–677). New York, NY: Oxford University Press.
Brennan, G., & Buchanan, J.M. (1980 [2000]). The collected works of James M. Buchanan, volume 9: The power to tax: Analytical foundations of a fiscal constitution. Indianapolis, IN: Liberty Fund.
Buchanan, J. M. (1964). What should economists do? Southern Economic Journal,30(3), 213–222.
Buchanan, J.M. (1975 [2000]). The collected works of James M. Buchanan, volume 7: The limits of liberty: Between anarchy and leviathan. Indianapolis, IN: Liberty Fund.
Buchanan, J.M. (1979 [1999]). Politics without romance: A sketch of positive public choice theory and its normative implications. The collected works of James M. Buchanan, volume 1: The foundations of constitutional liberty, pp. 45–59. Indianapolis, IN: Liberty Fund.
Buchanan, J. M. (1983). Rent seeking, noncompensated transfers, and laws of succession. Journal of Law and Economics,26(1), 71–85.
Buchanan, J. M. (1987). The constitution of economic policy. The American Economic Review,77(3), 243–250.
Buchanan, J. M. (1994). Ethics and economic progress. Norman, OK: University of Oklahoma Press.
Buchanan, J. M., & Tullock, G. (1968). The dead hand of monopoly. Antitrust Law and Economic Review,1, 85–96.
Buchanan, J. M., & Yoon, Y. J. (Eds.). (1994). The return to increasing returns. Ann Arbor, MI: University of Michigan Press.
Buchanan, J. M., & Yoon, Y. J. (1995). Constitutional implications of alternative models of increasing returns. Constitutional Political Economy,6, 191–196.
Buchanan, J. M., & Yoon, Y. J. (1999). Generalized increasing returns, Euler’s theorem, and competitive equilibrium. History of Political Economy,13(3), 511–523.
Buchanan, J. M., & Yoon, Y. J. (2000). A Smithean perspective on increasing returns. Journal of the History of Economic Thought,22(1), 43–48.
Buonanno, P., Durante, R., Prarolo, G., & Vanin, P. (2015). Poor institutions, rich mines: Resource curse in the origins of the Sicilian Mafia. The Economic Journal,125(586), F175–F202.
Cancila, O. (1992). L’economia della Sicilia: Aspetti storici. Palermo: Il Saggiatore.
Canciullo, G. (2002). Terra e potere: Gli usi civici nella Sicilia dell’ottocento. Catania: Giuseppe Maimone Editore.
Catanzaro, R. (1988). Il delitto come impresa: Storia sociale della mafia. Padova: Liviana Editrice.
Congleton, R. (2011). Perfecting parliament: Constitutional reform, liberalism, and the rise of western democracy. New York, NY: Cambridge University Press.
Cox, G.W., North, D.C., & Weingast, B.R. (2015). The violence trap: A political-economic approach to the problems of development. SSRN: https://ssrn.com/abstract=2370622.
Davis, J. A. (1988). Conflict and control: Law and order in nineteenth-century Italy. Atlantic Highlands, NJ: Humanities Press International.
de Jasay, A. (1985 [1998]). The State. Indianapolis, IN: Liberty Fund.
Dickie, J. (2004). Cosa Nostra: A history of the Sicilian Mafia. New York, NY: Palgrave Macmillan.
Dimico, A., Isopi, A., & Olsson, O. (2017). Origins of the Sicilian Mafia: The market for lemons. The Journal of Economic History,77(4), 1083–1115.
Epstein, S. R. (1992). An island for itself: Economic development and social change in late medieval Sicily. New York, NY: Cambridge University Press.
Franchetti, L. (1877 [1974]). Inchiesta in Sicilia: Condizioni politiche e amminstrative della Sicilia. Firenze: Vallecchi.
Frye, T. (2004). Credible commitment and property rights: Evidence from Russia. The American Political Science Review,98(3), 453–466.
Gambetta, D. (1993). The Sicilian Mafia: The business of private protection. Cambridge, MA: Harvard University Press.
Geloso, V.J., & Salter, A.W. (2018). State capacity and economic development: Causal mechanism or correlative filter? SSRN: https://ssrn.com/abstract=3294086.
Gifford, A., Jr., & Kenney, R. W. (1984). Socialism and the revenue maximizing leviathan. Public Choice,42(1), 101–106.
Grossman, H. I. (2002). “Make us a king”: Anarchy, predation, and the state. European Journal of Political Economy,18, 31–46.
Grossman, H. I., & Kim, M. (1996). Predation and accumulation. Journal of Economic Growth, 1(3), 333–350.
Hayek, F. A. (1960). The constitution of liberty. Chicago, IL: University of Chicago Press.
Holcombe, R. G. (2018). The Coase theorem, applied to markets and government. The Independent Review,23(2), 249–266.
Holcombe, R. G. (Forthcoming). Progressive democracy: The ideology of the modern predatory state. Public Choice. https://doi.org/10.1007/s11127-019-00637-z.
Hough, J. F., & Grier, R. (2015). The long process of development: Building markets and states in pre-industrial England, Spain, and their colonies. New York, NY: Cambridge University Press.
Johnson, N. D., & Koyama, M. (2014). Tax farming and the origins of state capacity in England and France. Explorations in Economic History,51(1), 1–20.
Johnson, N. D., & Koyama, M. (2017). States and economic growth: Capacity and constraints. Explorations in Economic History,64(2), 1–20.
Johnson, N. D., & Koyama, M. (2019). Persecution & toleration: The long road to religious freedom. New York, NY: Cambridge University Press.
Kiser, E., & Barzel, Y. (1991). The origins of democracy in England. Rationality and Society,3(4), 396–422.
Koenigsberger, H. G. (1951). The government of Sicily under Philip II of Spain: A study in the practice of empire. London: Staples Press.
Lane, F. C. (1958). Economic consequences of organized violence. The Journal of Economic History,18(4), 401–417.
Leeson, P. T. (2007a). Anarchy, monopoly, and predation. Journal of Institutional and Theoretical Economics,163(3), 467–482.
Leeson, P. T. (2007b). Better off stateless: Somalia before and after government collapse. Journal of Comparative Economics,35(4), 689–710.
Leeson, Peter T. (2014). Anarchy unbound: Why self-Governance works better than you think. New York, NY: Cambridge University Press.
Leeson, P. T., & Suarez, P. A. (2016). An economic analysis of Magna Carta. International Review of Law and Economics,47, 40–46.
Levi, M. (1989). Of rule and revenue. Berkeley and Los Angeles, CA: University of California Press.
Levy, D. M. (1990). The bias in centrally planned prices. Public Choice,67(3), 213–226.
Mack Smith, D. (1968). A history of Sicily: Modern Sicily after 1713. London: Chatto & Windus.
Madison, J. (1788 [2001]). Federalist no. 51: The structure of the government must furnish the proper checks and balances between the different departments. In Hamilton, A., Jay, J., & Madison, J. The Federalist, pp. 267–272. Indianapolis, IN: Liberty Fund.
Maine, H. S. (1861). Ancient law. London: John Murray, Albemarle Street.
McGuire, M. C., & Olson, M., Jr. (1996). The economics of autocracy and majority rule: The invisible hand and the use of force. Journal of Economic Literature,34(1), 72–96.
Mises, L.v. (1949 [1966]). Human action: A treatise on economics (3rd ed.). Chicago, IL: Henry Regnery.
Montigore, A. (1749). Parlamenti generali del Regno di Sicilia dall’anno 1446 fino al 1748, tomo primo. Palermo.
North, D. C. (1978). Structure and performance: The task of economic history. Journal of Economic Literature,16(3), 963–978.
North, D. C. (1981). Structure and change in economic history. New York, NY: W.W. Norton & Company.
North, D. C. (1991). Institutions. Journal of Economic Perspectives,5(1), 97–112.
North, D. C., Wallis, J. J., Webb, S. B., & Weingast, B. R. (2013). Limited access orders: An introduction to the conceptual framework. In D. C. North, J. J. Wallis, S. B. Webb, & B. R. Weingast (Eds.), In the Shadow of violence: Politics, economics, and the problems of development (pp. 1–23). New York, NY: Cambridge University Press.
North, D. C., Wallis, J. J., & Weingast, B. R. (2009). Violence and social orders: A conceptual framework for interpreting recorded human history. New York, NY: Cambridge University Press.
North, D. C., & Weingast, B. R. (1989). Constitutions and commitment: The evolution of institutions governing public choice in seventeenth-century England. The Journal of Economic History,49(4), 803–832.
Nutter, G. W. (1968). Markets without property: A grand illusion. In N. A. Beadles & L. A. Drewry Jr. (Eds.), Money, the market, and the state (pp. 137–145). Athens, GA: University of Georgia Press.
Olson, M. (1993). Dictatorship, democracy, and development. The American Political Science Review,87(3), 567–576.
Ostrom, E. (1990). Governing the commons: The evolution of institutions for collective action. New York, NY: Cambridge University Press.
Pejovich, S. (2003). Understanding the transaction costs of transition: It’s the culture, stupid. The Review of Austrian Economics,16(4), 347–361.
Piano, E. E. (2019). State capacity and public choice: a critical survey. Public Choice,178(1–2), 289–309.
Powell, J.M., trans. (1231 [1971]). The Liber Augustalis or Constitutions of Melfi promulgated by the Emperor Frederick II for the Kingdom of Sicily in 1231. Syracuse, NY: Syracuse University Press.
Rajan, R. (2004). Assume anarchy. Finance and Development (September), 56–57.
Riall, L. (1992). Liberal policy and the control of public order in Western Sicily 1860–1862. The Historical Journal,35(2), 345–368.
Riall, L. (1998). Sicily and the unification of Italy: Liberal policy and local power. Oxford: Clarendon Press.
Riall, L. (2003). Elites in search of suthority: Political power and social order in nineteenth-century Sicily. History Workshop Journal,55, 25–46.
Roselli, J. (1956 [2008]). Lord William Bentinck and the British occupation of Sicily: 1811–14. New York, NY: Cambridge University Press.
Sabetti, Filippo. (1982). The making of Italy as an experiment in constitutional choice. Publius,12(3), 65–84.
Sabetti, F. (1984 [2002]). Village politics and the mafia in Sicily (2nd ed.). Montreal: McGill Queens University Press.
Salter, A. W. (2015a). Rights to the realm: reconsidering Western political development. American Political Science Review,109(4), 725–734.
Salter, A. W. (2015b). Sovereignty as exchange of political property rights. Public Choice,165(1), 79–96.
Salter, A. W. (2016). Political property rights and governance outcomes: A theory of the corporate polity. The Journal of Private Enterprise,31(4), 1–20.
Shliefer, A., & Vishny, R. (1992). Pervasive Shortages under Socialism. The Rand Journal of Economics,23(2), 237–246.
Sonnino, S. (1877 [1974]). Inchiesta in Sicilia: I contadini in Sicila. Firenze: Vallecchi.
Tilly, C. (Ed.). (1975). The formation of national states in Western Europe. Princeton, NJ: Princeton University Press.
Tilly, C. (1985). War making and state making as organized crime. In P. Evans, D. Rueschemeyer, & T. Skocpol (Eds.), Bringing the state back in (pp. 169–187). New York, NY: Cambridge University Press.
Tollison, R. D., & Wagner, R. E. (1991). Romance, realism, and economic reform. Kyklos,44(1), 57–70.
Tullock, G. (1965). The politics of bureaucracy. Washington, D.C.: Public Affairs Press.
Tullock, G. (1975). The transitional gains trap. The Bell Journal of Economics,6(2), 671–678.
Vahabi, M. (2011). Appropriation, violent enforcement and transaction costs: A critical survey. Public Choice,147(1), 227–253.
Vahabi, M. (2016a). A positive theory of the predatory state. Public Choice,168(3/4), 153–175.
Vahabi, M. (2016b). The political economy of predation: Manhunting and the economics of escape. New York, NY: Cambridge University Press.
Varese, F. (1994). Is Sicily the future of Russia? Private protection and the rise of the Russian Mafia. European Journal of Sociology,35(2), 224–258.
Varese, F. (2001). The Russian mafia: private protection in a new market economy. Oxford: Oxford University Press.
Weingast, B. R. (1995). The economic role of political institutions: Market-preserving federalism and economic development. Journal of Law Economics and Organization,11(1), 1–31.
Weingast, B. R. (1997). The political foundations of democracy and the rule of law. The American Political Science Review,91(2), 245–263.
Ziblatt, D. (2004). Rethinking the origins of federalism: Puzzle, theory, and evidence from nineteenth-century Europe. World Politics,57(1), 70–98.
Ziblatt, D. (2006). Structuring the state: The formation of Italy and Germany and the puzzle of federalism. Princeton, NJ: Princeton University Press.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
We wish to thank William Shughart and Mehrdad Vahabi for their valuable feedback and suggestions. We also thank the two anonymous referees for their comments, which helped improve and clarify the argument outlined in the paper. Any remaining errors are entirely our own.
Rights and permissions
About this article
Cite this article
Boettke, P.J., Candela, R.A. Productive specialization, peaceful cooperation and the problem of the predatory state: lessons from comparative historical political economy. Public Choice 182, 331–352 (2020). https://doi.org/10.1007/s11127-019-00657-9
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11127-019-00657-9