State, Anarchy and Collective Decisions

State, Anarchy and Collective Decisions

State, Anarchy and Collective Decisions

State, Anarchy and Collective Decisions

Synopsis

This book provides an introduction to the applications of game theory to a series of questions that are fundamental in political economy. These questions include: Why do we need states? What might happen without protection for life and property? How might tribes or criminal gangs behave in struggles over material possessions? Would people tell the truth if asked what they wanted?

Excerpt

Societies generally, and in the long run, require some sort of mechanism to prevent chronic and widespread internal violence and to provide for an orderly process of collective decision making. I say ‘generally and in the long run’ because such problems may not be solved, or only partially solved, for considerable periods of time. Questions about the nature of these problems might be thought of as questions about the foundations of political-economic systems.

The purpose of this book is to provide social scientists with an introduction to some of the applications of strategic choice, or game, theory to some of these questions. It also deals with some aspects of collective decision making.

The focus on questions about the foundations of political-economic systems places this work within an old, and continuing, tradition in political-economic theory. The aim of this tradition is to understand political-economic systems as broadly as possible by starting at the most basic level. This is the level that requires the smallest number of assumptions about the existence of institutions, such as the state and markets, and questions the preconditions for their existence. That is, rather than simply assume the existence of order and property rights and some systematic process of choice, it is asked, what would happen in the absence of these institutions? Why are they needed?

This focus is a departure from much of the more familiar literature in economics and public choice. In this literature the tendency is to start by assuming the existence of a market without analysing the preconditions required for trade and exchange. The problem here is that the structure of the system as a whole may sometimes be forgotten. The preconditions required for trade to take place and for security of property tend to be overlooked. One result of this is that government and collective choice mechanisms tend to be treated as a residual category that compensate for market failure. At best this is a distorted framework. It may be more useful to think of the market as a means of compensating for collective choice failures.

The techniques of game theory provide the most appropriate formal approach to the analysis of problems of security and collective choice because these problems arise as the result of strategic interaction. They do not arise as the result of individuals taking actions that have no consequences for anyone else. Moreover, the game theory approach has the advantage of consistency. This is because it applies the assumption that individuals are optimizing in a consistent way and . . .

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