Special issue to commemorate the 70th Anniversary of the Battle of ...

War and Peace: Economic Rationales for Preserving War Relics
the peace model can be preserved by rationalizing
violence, even for conflicting regimes. Again,
rationalizing violence completely would mean that acts
of violence fall to zero.
There is a different angle to addressing the peace
model that can serve as a prelude to the next section in
the discussion of violence. That is, with the exception
of small communities where self-enforcing equilibria
are of the simplest type, most communities do require
specialists of violence. 7 Like any profession, some
specialists are born to be skillful at things they can
do, some need to be trained to become specialists.
Regardless, the existence of certain humans in the
species with ability to visit violence on other humans
can be analyzed not only in terms of the genes of Cain
(according to the Bible), but as the necessary result of
the economists’ notion of comparative advantage in
specialization.
WAR: ORGANIZED VIOLENCE
Specialization implies that the execution of violence
can be treated as a profession like any other activity
in a society. Those who do not wish to (or do not
have a comparative advantage in) use violence will
want to seek protection from those who are able and
willing to do so. The gain from trade in the forming
of this exchange is mutually beneficial; and as such,
sustainable from the point of view of the human
species as a whole, as well as possibly for other specie.
Economists have often characterized exchanges in
terms of the demand and supply of goods and services
being exchanged. There is no reason why the same
analysis cannot be applied for violence as a profession.
War can thus be analyzed as a market in the demand
and supply of violence; or, the flip side of the same
problem, the demand and supply of protection. 8
Viewing wars as outcomes of the demand and supply
of protection can provide a way to view war as
organized violence. A subfield in economics called
industrial organization (IO) emphasizes how firms
and industries are organized. Applying the IO concept
to the market for protection can tell us a lot about
how organized violence can be structured. Basically,
the market structure depends on the cost structure of
organizing protection, which has a fixed cost and a
variable cost component. The fixed cost is invariant to
the number of people and assets being protected. The
variable cost increases as number of people and assets
being protected increase. Military forces, together with
other regime services which are often viewed as public
goods, are the fixed cost components in providing
violence. Yet, it is the marginal cost that varies with
the number, size, and the type of assets being protected
that will determine the scope and the size of a protector
— a regime. A rising marginal cost of protection
will result in a competitive market in protection. A
competitive market in protection will make war more
likely to happen. A perfect competitive market is going
to lead to chaos, or complete anarchy. That is why
we might want to think of war as organized violence
— a structured method for managing aggression and
protection efficiently.
It is useful to think of organized violence as a problem
in industrial organization because we can also use it
to analyze why some regimes can grow while others
may stagnate and indeed disappear. This approach
can potentially generate more interesting results than
a game-theoretical approach, because the ‘market in
protection’ approach can analyze growth in demand
(increase in population, size and type of assets), while
a game theoretical approach is constrained by a fixed
number of participants — thus may not be particularly
suitable for analyzing the relationship between regime,
growth, and economic efficiencies.
Aside from increases in population and assets,
changes to organized violence can also come about
via military technology (affecting fixed costs more)
as well as civilian organization of regimes, including
how different cultures and value systems can be
integrated (affecting variable costs more). Efficiency
in military technology can lower the average fixed
cost of protection, but it does no good if the marginal
costs of protection have a steeply upward slope, i.e.
the regime is not sufficiently inclusive and welcoming
to an increase in population and assets. All these
suggest that the supply side of the market in protection
is as important to analyze as the demand side in its
relationship to growth and sustainability.
Putting the demand and supply of protection into
dynamic analysis can reveal the cyclical nature
of wars and changes of regimes. Innovation in
military technology, communication, and methods
of resolving non-military conflicts can lower both
average and marginal costs of protection. This leads
to a concentration of protection (i.e. a smaller number
of protectors). But increasing demand for protection
and increasing diversity of people and assets can lead
to a further rising cost of protection that can only be
alleviated by another wave of innovation. This may
indeed be the problem that Usher (1989) was after. We
shall not further complicate the implications of this in
this essay.
Economists are known to be good with abstract
theorizing of socio-political-economic problems. To
them, seeking a theoretical foundation to divergent
phenomena consistent with their basic assumptions is
important. For general readers, however, the theorizing
can be excessive and even counter-productive.
Articulating the problem of war and peace at a level
where practitioners may be more comfortablewith
understanding, consider again the road example used
7
Consider, for example, the institution of the podesteria and the podestá in Genoa in 1194, as described Greif (2005).
8
Dixit (1994) summarizes much of the work done in this area, extending economic inquirys into the field of political science, anthropology, or
even biology. Yu, et.al.(2007), describes a market in protection for the warlord period in early 20th century China.
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