The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force

Martin McGuire () and Mancur Olson

Journal of Economic Literature, 1996, vol. 34, issue 1, 72-96

Abstract: If the leader of a bandit gang in an anarchy can hold a territory, he gains from becoming a public-good-providing autocrat. His monopoly over crime gives him an "encompassing" stake in the productivity of his domain that limits his tax-theft and makes him pay for public goods. We prove that a democracy run by an optimizing majority earning incomes in the market necessarily redistributes less than an autocrat and that a majority that earns a sufficient fraction of market income to be a "super-encompassing" interest redistributes no income and provides an ideal level of public goods.

Date: 1996
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Chapter: The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force (1998)
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