Money and Markets: Essays in Honor of Leland B. Yeager

Ethnic conflict and the economics of social cooperation 229more from each trade when they “stick to their own kind.” At the extreme, D-typeswill become a segregated minority living among the C-types and trading, scheming,and defrauding mostly with other D-types. Let us refer to this as the First CaseScenario.Let us move on to the Second Case Scenario. Now we assume that the C-typecannot tell a D-type, and vice versa. Trades go on with traders meeting at random.Trading partners take positions “as if” they were randomly drawn from the generalpopulation. Now we consider the expected utility obtained by C-types and comparethat with the expected utility obtained by D-types. Supposing the probability ofselecting a trading partner who is a D-type is measured by the proportion ofD-types in that population, then the expected utility of the D-types must alwaysbe larger than that of the C-types. 9 It is now the C-types who dwindle in numberand perhaps are threatened with extinction. We shall call this the Second CaseScenario. 104 Eliminationist statism simplifiedNow we can relate this model to the problem of ethnic state building. Suppose wehave two ethnic groups living within a geographic region. The Alphavillians (hereC-types) complain about the unscrupulous behavior and untrustworthiness of theother ethnic group, the Betavillians (the D-types). Unfortunately, neither group cantell the other group apart, and in many cases C- and D-types have intermarried.The Betavillians are growing in number relative to the Alphavillians. This is theSecond Case Scenario. Suppose, however, the Alphavillians could pass a decreerequiring the Betavillians to identify themselves by carrying a card or wearing anarmband of some sort. Under these conditions, the Betavillians will decline innumber while the Alphavillians thrive (First Case Scenario).There may even be gains from ordering the Betavillians out of the land completelyor protecting the Alphavillian community by separating the two nationsthrough redrawing national borders. The Alphavillians may find these methods ofreorganization “utility maximizing.” It is true that the regional economy will besmaller in terms of population size, but the psychological gains accruing to theAlphavillians, who are now rid of the parasitic Betavillians, can be large. But whatabout the real physical production of goods and services? Won’t that be lower as aconsequence of expelling an ethnic minority from a region? Indeed, even ifaggregate regional productivity falls, a material rise in living standards for thedominant group can produce results consistent with the Hayek–Simon LIPD. Indeed,regional productivity falls with the denuded population as Hayek–Simon predicts,but the dominant ethnic group, the group that remains in the region, may obtainan increased share of the smaller total productivity, which could account for anabsolute rise in living standards enjoyed by the remaining-at-home group. Ofcourse, the dominant ethnic group need only expect this lucrative payoff in theshort run to find that their narrow economic interests are aligned with the exerciseof intolerance and ethnic hatred.