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Are stationary bandits better?
I once wrote:
Some time ago, [Mancur] Olson started work on the fruitful distinction between a stationary and a roving bandit. A stationary bandit has some incentive to invest in improvements, because he will reap some return from those improvements. A roving bandit will confiscate wealth with little regard for the future. Olson then used this distinction to help explain the evolution of dictatorship in the twentieth century, and going back some bit in time, the rise of Western capitalism.
I have never found this approach fully convincing. Is the stationary bandit really so much better than the roving bandit? Much of Olson's argument assumes that the stationary bandit is akin to a profit-maximizer. In reality, stationary bandits, such as Stalin and Mao, may have been maximizing personal power or perhaps something even more idiosyncratic. Second, the stationary bandit might be keener to keep control over the population, given how much is at stake. He may oppose liberalization more vehemently, for fear that a wealthier and freer society will overthrow him.
Here is more. I had forgotten I had written that review, so I must thank Arnold Kling for the pointer.
Posted by Tyler Cowen on February 28, 2006 at 07:19 AM in Political Science | Permalink
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Comments
Methinks capital, especially financial capital, is much like a roving bandit these days...
Posted by: A Tykhyy at Feb 28, 2006 8:06:37 AM
Elasticity matters. A stationary bandit does not necessarily have an interest in maximizing the value of production. There are two offsetting factors. The total value of production changes in response to banditry methods. The percentage take by the bandits changes by banditry methods. In short, a bandit would prefer 20% of $9 to 10% of $10. On the other hand, a stationary bandit would prefer 10% of $10 to 10.5% of $9. Which is it? It will change over time as technology changes.
There is also a matter of credible commitment - given possible technology, can the rest of society bargain with the bandits to induce optimal banditry that is stable over time?
Posted by: tedm at Feb 28, 2006 9:05:45 AM
reason magazine had a piece recently that I think will help to shed light. The example given was Paul Biya, president of Cameroon. He's been in power since 1982, but still Cameroon is among the poorest countries in the world. If the stationary bandit theory worked, it should be that Biya would have made some investments to improve the infrastructure, etc., in order to maximize his profits.
Here's where it gets tricky--for many dictators, there is no way of knowing how "stationary" they actually are. If Biya were a perfectly rational actor, and if he knew that he would be in power for 20+ years, then of course he would put money into roads and schools, because then the economy would be strong enough to keep him rich for as long as he's in power. If, on the other hand, he thought he'd only stay in power for 10 years, then there is no reason to make road improvements, etc., because the existing roads will work well enough for the time he's in power. Because the dictator has imperfect knowledge regarding how stationary he is, he may act more like a roving bandit.
The piece is Tim Harford, "Why Poor Countries are Poor," reason magazine (March 2006) pp. 32-39.
Posted by: kjm at Feb 28, 2006 9:41:36 AM
I'm fairly sure this same distinction is made by Jared Diamond in Collapse as well.
Posted by: madison at Feb 28, 2006 1:06:59 PM
Although Dictators obviously like to be wealthy they also like to remain
power. I am willing to bet that many Dictators see the benefits from
public infrastructure investment weighed against the risks to their
regime from opening up. Perhaps an even more apt example is North
Korea. The thugs in Pyongyang have, time after time, shown a preference
for centralized power over development. Even Alex might develop a taste
for concentrated authority were he a dictator. (not that that is a bad
thing Mr. Tabarrok sir,...)
Posted by: Cb at Feb 28, 2006 2:35:03 PM
It's not obvious that a dictator maximizes his purchasing power by making his people wealthier. Is it possible that poorer people will work more cheaply and that the typical dictator's consumption of imports is a small enough of his total spending that he is therefore wealthier when his people are poorer? I bet this ist true in a country with oil, diamonds, etc.
Posted by: michael vassar at Feb 28, 2006 6:00:32 PM
This discussion does not seem to be entirely fair to Olson's conception. Olson was working towards incorporating force into economic analysis. His distinction between a roving bandit and a stationary bandit was not between good government and bad government but between no government and some government. In was a question about the incentives to provide quite basic public goods. So, to take the above examples, are folk in Cameroon and places like it typically better off than folk in Somalia and places like that?
He also pointed out that Stalin had developed an optimal structure for extraction of surplus in the interests of the ruler. This somewhat changed the downsides of a 'stationary bandit'.
Taking the concept of a stationary bandit having different incentives further, Olson argued that the longer the time horizons of the ruler, the more the interests of the ruler approached those of the ruled, so, of the forms of government where the ruled had no choice of ruler, hereditary rulers were a better prospect. A position which even the modern world gives some support for.
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