Theft by Bandits and Taxation by Kings: A Critique of Mancur Olson on State-Formation

Abstract

In Power and Prosperity (2000), Mancur Olson argued that bandits who permanently monopolise theft in a given location would limit their own requisitions, protect their victims from theft carried out by others and possibly even provide public goods for their victims. Such stationary and monopolist bandits would effectively transform themselves into autocratic rulers of pristine states. I argue that Olson's ideas do not constitute a satisfactory theory of stateformation for two main reasons. First, kleptocracy, which is a condition of competitive theft, represents an equilibrium according to Olson. So there exists no reason to believe that theft will become monopolised. Second, in Olson's theory, if a monopolist bandit exists, then a monopolist on violence presumably also exists. So having a ‘monopolist on violence’ seems to constitute both ‘cause’ and ‘effect’ in his account. However, if properly revised, his basic insights might nevertheless furnish an important hypothesis from which a more satisfactory theory of state-formation could be constructed.