Institutions and Exchange

Randall Holcombe

Chapter 7 in The Economic Foundations of Government, 1994, pp 110-127 from Palgrave Macmillan

Abstract: Abstract Government power is profitable to those who have it because they can create barriers to entry and charge monopoly prices for their services. The government’s exchange of protection for tribute creates a situation where monopoly will tend to emerge, as does the government’s ability to create legislation. One could imagine an ideal setting where, following a model like Tiebout,1 competitive governments would eliminate any monopoly profit, but the government’s exchange of protection for tribute naturally leads toward a concentration of power that gives rise to monopoly profits.2 The lure of monopoly profits from government power means that people will have an incentive to compete for the right to have that monopoly power.3

Keywords: Majority Rule; Political Institution; Median Voter; Vote Model; Economic Foundation (search for similar items in EconPapers)
Date: 1994
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DOI: 10.1007/978-1-349-13230-0_7

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