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By HERSCHEL I. GROSSMAN*
From ancient times to the present, history an insurrection with the objective of maxi-
records numerous insurrections involving mizing their expected income. In a success-
the unlawful use of force to defy the estab- ful insurrection, the insurgents take as booty
lished system of property rights and taxa- all of the revenue of the ruler and his clien-
tion. This paper develops a positive theory tele.
that treats insurrection and its deterrence The interaction between the ruler and
or suppression as economic activities that the peasants generates an equilibrium allo-
compete with production for scarce re- cation of labor time among production, sol-
sources. To account explicitly for resource diering, and insurrection and a probabilistic
constraints, the analysis is developed within distribution of income among rents and
a general equilibrium framework. In addi- taxes received by the ruler's clientele, net
tion, the analysis is explicitly choice-theo- earnings of productive labor, wages of sol-
retic. diering, and booty taken by insurgents. The
The principals in this theory are a ruler equilibrium on which the analysis focuses is
and a large number of peasant families. The a noncooperative solution to a one-shot
ruler enforces the collection of land rents game between the ruler and the peasants.
and/or taxes on productive labor. The ruler The analysis reveals how the allocation of
also employs soldiers in order to reduce the time and the probabilistic distribution of
probability of a successful insurrection. The income depend on the technological param-
ruler's objective is to maximize the expected eters that govern production and insurrec-
income of his clientele, who include prop- tion.
erty owners and other politically favored The theory emphasizes the expected pri-
groups. The peasant families respond to the vate returns to insurgents. Specifically, the
ruler's policies by allocating their labor time analysis assumes that only active insurgents
to production, soldiering, or participation in share in the booty taken in a successful
insurrection. In this respect, the present
theory contrasts sharply with theories that
*Department of Economics, Brown University, assume that successful insurrections pro-
Providence, RI 02912. Edward Buffie suggested the duce mainly social benefits from which ac-
idea for this paper based on the example of the Sendero tive insurgents cannot exclude nonpartici-
Luminoso movement in Peru. I am indebted to Harl pants. These social-benefit theories stress
Ryder for helpful modeling suggestions and for gener-
ous technical assistance. I also received helpful com-
the importance of such factors as
ments from Oded Galor, Dan Usher, seminar partici- "ideology," class identification, and anomie
pants at Wesleyan University, and anonymous referees. in overcoming the free-rider problem asso-
912
ciated with nonexcludability. For example, suggest merely an attempt to alter the in-
in his elegant analysis of revolution as a come distribution associated with existing
two-person game, John E. Roemer (1985, property rights and taxation). In actual
1988) "endows Lenin with a charisma which cases, this distinction can be blurred (see,
enables him to convince people to behave for example, the discussion of premodern
cooperatively" (1988 p. 234) and to join the China in James Tong [1988]).
revolution against the Czar even though The theory also does not consider the
people who do not risk the Czar's wrath by questionof how-that is, by what combina-
joining also will benefit from Lenin's pro- tion of force and common consent-the
gressive program if the revolution succeeds. ruler initially achieved the legal right to
(Interestingly, Gordon Tullock [1974 p. 45] enforce a systemof propertyrightsand tax-
points out that the real Lenin did not count ation. The importantpoint is that, even if
on being able to overcome the free-rider the citizenryvoluntarilysubjecteditself to a
problem and that actually "Lenin is famous rulerwith the intentionof securingessential
for having developed the idea of profes- social benefits, such as the provisionof law
sional revolutionaries.") Because social con- and order and other public goods, the ruler
sequences do not preclude private returns with his sovereignpowers in hand is legally
as well, it seems appropriate to view theo- free to pursue the self-interestof his clien-
ries (like the present one) that emphasize tele. EdwinS. Mills (1986 p. 138) points out
private returns and theories that emphasize that we can "makemuchof historyintelligi-
social consequences as complementary. ble" by assuming"that governmentsextract
The present theory also emphasizes that from economies under their jurisdictionas
time allocated either to soldiering or to much surplusor output as possible and use
insurrection, although it can be privately this surplus to benefit the smallest group
useful in influencing distributive shares, is possible."
socially wasteful. In this respect, the theory As already noted, although the analysis
goes beyond existing choice-theoretic mod- derives a deterministic allocation of re-
els of insurrections, such as Dan Usher and sources,it derivesonly a probabilisticdistri-
Merwan Engineer (1987) and Usher (1989), bution of income. Specifically,the analysis
as well as Roemer (1985, 1988), that con- determineswhether or not an insurrection
sider only distributive consequences and that occursbut only determinesits probabilityof
implicitly assume that insurrection and its success.The present paper is not concerned
deterrence and suppression do not reduce with the idiosyncraticfactors that help to
productive activity. The present theory also determinethe actualoutcomesof particular
contrasts with the models of Jack Hirsh- insurrections.In a complementaryanalysis,
leifer (1988) and Michelle R. Garfinkel TimurKuran(1989) models the role of ran-
(1990), who analyze the effect of technology dom events and social psychologyin helping
on the allocation of resources between pro- to determine the success of insurrections
ductive efforts and appropriative efforts, but and discussesspecifichistoricalexamples.
who treat the struggle over distributive
shares as a two-party contest between com- I. The Economy and the Ruler
peting rulers and do not analyze the behav-
ior of the subjects. Consider a simple production economy in
The analysis that follows defines insurrec- which each of a large number of small iden-
tion generally to include any forceful action tical peasant family units can divide the
against the established system of property labor time of its family members among a
rights and taxation. This definition does not nonnegative fraction 1 devoted to produc-
distinguish between rebels or revolutionar- tion, a nonnegative fraction s devoted to
ies (terms that suggest an attempt to seize soldiering,and a nonnegativefraction i de-
powers of sovereignty in order to effect a voted to participation in an insurrection.
once-for-all alteration of property rights and (The analysisdoes not distinguishbetween
taxation) and bandits or pirates (terms that familiesin which individualsengage in more
than one activity and families who assign probabilityof there not being a successful
different family members to different activi- insurrection.The ruler'spolicy instruments
ties.) Although we can interpret this setup are x, w, and S. (If x includes land rents,
as the usual representative-agent abstrac- then this setup assumes that the system of
tion, anectodal evidence suggests examples, property rights allows property owners to
such as the Sendero Luminoso insurrection, set the rental share collusively.This setup
in which actual peasant families apparently also abstractsfrom the requirementthat the
devote positive amounts of time to each of announcedtax rate or rental share must be
these activities. time-consistent.For complementaryanaly-
The Pareto optimal allocation of time in ses that allowfor a bindingtime-consistency
this economy-that is, the allocation that constraint,see Grossmanand Suk Jae Noh
maximizes total production-is (L, S, I) = [1990, 1991].)The timing of actions in this
(1,0,0), where L, S, and I represent the economy is as in a principal-agent model,
nonnegative fractions of time that families with the ruler (as principal)movingfirst by
on average devote to production, soldiering, choosing the policy instruments and the
and insurrection, respectively. Any time de- peasant families (as agents) moving second
voted either to soldiering or to insurrection, by respondingto the ruler'spolicy choices.
although it can be privately useful in influ- Thus, in making his policy choices, the ruler
encing distributive shares, is socially waste- takes as given the behavioralresponses of
ful. The condition (L, S, I) = (1, 0, 0) obtains the peasantfamiliesto his policies as well as
if and only if (1, s, i) = (1, 0, 0) for all peasant the technology of production, summarized
families. by the parameterA, and the technologyof
The income of the ruler's clientele, mea- insurrection.
sured per peasant family, is either r - wS
with probability 1- 3 or zero with probabil- II. The Peasant Families
ity /3, 0 < / ? 1, where r represents total
taxes or rents per family received by the A peasant familycan obtain income from
ruler and his clientele, w is the wage rate of production,from soldiering,or from partici-
soldiers, and /8 is the probability of a suc- pation in an insurrection.A family's net
cessful insurrection. As noted above, this incomefromproductionis (1- x)Al. A fam-
setup assumes that in a successful insurrec- ily's income from soldiering is either ws
tion the insurgents take as booty all of the with probability1- /8 or zero with probabil-
revenue of the ruler and his clientele. Pro- ity /8. This setup assumes that soldiers are
duction per family is a linear function AL, able to drawtheir pay only if there is not a
where A is a positive technological parame- successful insurrection.Finally, a family's
ter that measures productivity. Thus, r = income from participationin an insurrec-
xAL, 0 < x < 1, where x represents the tion is either ri/I with probability/8 or
fraction of output that is collected from zero with probability1-,/. This setup as-
each peasant family as land rents and taxes. sumes that insurgents divide their booty
(The discussion that follows usually refers among families proportionatelyto the time
to x simply as the tax rate and to r simply devoted by each familyto the insurrection.
as tax revenue.) The analysisdoes not attempt to explain
The ruler's objective is to maximize M, how the distributionof the booty taken by
the expected income of his clientele, where, insurgentsis enforced, and more generally,
on the above assumptions, it takes the organizationalstructureand co-
hesion of insurrectionsas given. (For more
(1) M = (1-/)(r-wS) on these issues within discussionsthat em-
phasize private returns to insurgents, see
= (1- /)(xAL - wS). Samuel L. Popkin [1988]and Michael Tay-
lor [1988].)The present setup also assumes
Equation (1) says that M equals tax revenue that the only cost associatedwith insurrec-
minus wage payments to soldiers times the tion is the productionforgone by devoting
time to the insurrection. This assumption activity whose expected return is more than
seems realistic to the extent that individual the expected returns from both of the other
insurgents can avoid retribution by easily activities. (The peasants' problem could be
blending back into the general population. generalized by making production risky or
(See Roemer [1985, 1988] for a complemen- subject to diminishing returns or by intro-
tary analysis in which the ruler can penalize ducing risk aversion, but these complica-
unsuccessful insurgents.) tions would seem not to alter the main
Each family takes x, A, /3, w, r, and I as results derived below.)
given and chooses 1, s, and i, subject to the
constraint 1 + s + i = 1, to maximize its ex- III. The Technology of Insurrection and Its
pected income, e. On the above assump- Suppression
tions, e is given by
To model the probability of a successful
(2) e=(1-x)A1+(1-f3)ws-+4-3ri/I. insurrection, /3, a natural assumption is that
,8 is an increasing function of I, the fraction
Given equation (2), the Kuhn-Tucker condi- of peasant time allocated to insurrection,
tions for family choices imply (i) that the and a decreasing function of S, the fraction
allocation of time to production by each and of peasant time allocated to soldiering. A
every peasant family satisfies plausible form for this function is
11-0
(0 for (1-x)A < Y
(4) /3=
1 for (1- x)A =Y O,I<1,O<cr<1.
(3a) [0,1]
t1 for (1-x)A > Y Given the form of equation (4), /8 is
bounded between zero and unity. The pa-
where Y max[(1- ,8)w, ,fr/I]; (ii) that the rameters 0 and a- in equation (4) represent
allocation of time to soldiering by each and the technology of insurrection. For given
every peasant family satisfies values of I and S between zero and unity,
/3 is larger the larger is 0 and the larger is
for w <W a. Moreover, the assumption that 0 is less
f i0 than unity implies that /8 is positive if and
(3b) S= [0,1] forw=W
only if I is positive and that /8 is increasing
t1 for w > W in I. The possibility that 0 equals zero pre-
sents an interesting special case, as will be
where ( -,B )W max[(1 - x)A, ,fr/I], and seen in the following section. The assump-
(iii) that the allocation of time by each and tion that a- is positive implies that, if I is
every peasant family to participation in an positive, then /8 is less than unity if and only
insurrection satisfies if S is positive and that /8 is decreasing in
S. As will be seen, the assumption that a- is
0O for ir/I<Z less than unity insures that a positive value
(3c) i [0,1] for fr/I=Z of M is feasible. (An extended analysis could
relate 0 and a- to such factors as qualitative
t1 for 3r/I > Z
human characteristics, geography, and the
quantity and quality of armaments.)
where Z = max[(1 - x)A,(1 - )w]. The elasticity of /8 with respect to I equals
Equations (3a), (3b), and (3c) indicate, the nonnegative fraction (1 - 0)(1 - /3), and
among other things, that a family would the elasticity of /8 with respect to a-
devote none of its time to any activity- equals the nonpositive fraction - a (1 - /3).
production, soldiering, or insurrection- Thus, the ratio (1 - 0)/a represents the
whose expected return is less than the ex- percentage increase in the fraction of time
pected return from either of the other activ- devoted to soldiering that is needed to
ities and would devote all of its time to any counteract the effect on /3 of a 1-percent
,fr xAL
with S = O, (L, I) > (0,0),
'~~~
's I ISI,
and L+I=1;or
Equation (5) implies that, for given positive dM dM dM
values of x, L, I, and S, the expected (6e) - < - > -
return to insurrection is larger the larger is aS - aL - aI
0 and the larger is oa. Equation (5) also
with I= S = 0 and L = 1; or
implies that with 0 > 0 the expected return
to insurrection evaluated at I = 0 would be dM dM dM
infinite but that with 0= 0 the expected - < - > -
(6f) aL -dI -
return to insurrection evaluated at I = 0 aS
equals rS-, which for S > 0 would be fi-
nite. with L= S=O and I= 1; or
IV. PolicyChoices dM dM dM
(6g) '<
aL S ->2 aI
The ruler's problem is to choose the pol-
icy instruments- x, w, and S -to maximize with L=I=Oand S=1.
M, as given by equation (1), subject to the
constraints given by equations (3a), (3b), To begin analyzing these Kuhn-Tucker
(3c), and (4). This problem is equivalent to conditions, note that conditions (6b), (6f),
the problem of choosing L, S, and I to and (6g) can be ruled out because L = 0
maximize M, subject to (L, S,I) 2 (0,0,0) would imply r = 0 and, hence, M = 0. The
and L + S + I = 1, where equations (3a), ruler would not choose to induce the peas-
(3b), and (3c) relate x and w to L, S, and I ants to denote zero time to production.
and equation (4) relates f8 to S and I. The Note also that one can rule out condition
Kuhn-Tucker first-order conditions for this (6d) because, with I > 0, S = 0 would imply
problem are , = 1 and, hence, M = 0. If the peasants
were devoting positive time to insurrection,
dM aM aM the ruler would not choose zero soldiering
(6a) ra=-=- time.
Next, observe that condition (6f) can be
ruled out, because from equation (5) the
with ( L, S, I) > (0, 0, 0), ratio 8fr/I evaluated at r > 0 and I = S = 0
and L+S+I=l;or would be infinite. Thus, I = S=0 would
contradict equations (3a) and (3c). If the
peasants were devoting zero time to both
aM aM
(6b) -< =adM insurrection and soldiering, the expected re-
dL dS dI turn from insurrection would be larger than
the return to production.
with L = 0, (S, I) > (0,0), To continue the analysis of the Kuhn-
and S + I= 1; or Tucker conditions, it is necessary to distin-
Empirical
Or 0 L I S x /3 M/A E/A E/(M + E) relevancea
0.01 0.1 0.941 0.056 0.0033 0.448 0.073 0.389 0.552 0.587 >'
0.50 0.1 0.780 0.114 0.107 0.326 0.302 0.105 0.675 0.865
0.99 0.1 0.1229 0.838 0.039 0.877 0.955 0.0001 0.1228 0.999 **
0.01 0.5 0.744 0.254 0.0025 0.495 0.349 0.239 0.505 0.679
0.50 0.5 0.524 0.407 0.070 0.523 0.707 0.047 0.477 0.910 *
0.99 0.5 0.0335 0.952 0.015 0.967 0.985 0.0000 0.0335 0.999 **
0.01 0.9 0.607 0.391 0.0021 0.567 0.492 0.174 0.433 0.173
0.50 0.9 0.393 0.550 0.057 0.637 0.798 0.030 0.363 0.924 *
0.99 0.9 0.0204 0.970 0.010 0.980 0.990 0.0000 0.0204 0.999 **
insurrection and the technology of insurrec- The lower three blocks of the table show
tion influence the allocation of time be- solutions for 0 > 0. With 0 > 0 Kuhn-
tween production and soldiering and the Tucker condition (6a) is relevant. Because
distribution of income. Specifically, the all positive tax rates are associated with
smaller is oa, the smaller is the value of S positive values of I, the ruler chooses a
associated with a given value of S -that combination of policies, which again in-
is, the more effective is soldiering time in cludes a positive amount of soldiering time
deterring insurrection. Consequently, the and a positive tax rate, that results in an
chosen value of x is negatively related to c, equilibrium in which peasants also allocate
and the chosen value of S is positively re- positive amounts of time to insurrection as
lated to a. well as to production. As a result, with 0 > 0
With I equal to zero, because S is posi- the equilibrium value of 3 is positive, and
tively related to a, L is negatively related to the distribution of income is probabilistic.
a. Moreover, the simulations show that, in As noted above, equations (4) and (5)
the limit as a- approaches zero, S ap- imply that, for given positive values of x, L,
proaches zero, and hence, with I equal to I, and S, both /8 and the expected return to
zero, L approaches unity. In other words, time allocated to insurrection, fir/I, are
an equilibrium allocation that is Pareto op- larger the larger is 0 and the larger is o-.
timal occurs in this economy only as a limit- Consequently, for given choices of x and S,
ing case that is approached as soldiering with 0 > 0 the larger is either 0 or a- the
time becomes extremely effective in deter- larger must be I, and hence the smaller
ring insurrection, and consequently, the must be L in order to equate the expected
amount of soldiering time needed to deter return to insurrection to the expected re-
insurrection completely approaches zero. turns to production and soldiering. As the
The table reports equilibrium values of table confirms, the first-order effect of ei-
M and E normalized by A-that is, as ra- ther larger 0 or larger a- would be that
tios of potential total production, which is peasant families allocate more time to in-
the value of M + E associated with L = 1. surrection and less time to production. The
Because x is negatively related to a, E/A larger value of I also would add to the
is positively related to a-. Thus, as the table direct effects of both larger 6 and larger o-
confirms, with 0 = 0 it must be that the in increasing /. Moreover, the negative re-
peasants' share of income, E/(M + E), is lation between L and both 0 and a, rein-
not only positively related to a, but in- forced by the positive relation between /8
creases with a even faster than L de- and both 6 and a, means that the expected
creases. In fact, as af approaches unity, income of the ruler's clientele, M/A, is
E/(M + E) also approaches unity. The im- negatively related to both 6 and a.
portant result is that the less effective is One sees from the table that, for some
soldiering time in deterring insurrection the combinations of 6 and a, both being be-
smaller is total income but the larger is the tween zero and unity, the equilibrium prob-
income of the peasants. ability of a successful insurrection would be
Because for a smaller a the peasants so large as to be inconsistent with a viable
receive a much smaller share of a larger political structure. For example, with 0 pos-
total income, the income of the ruler's itive and oa close to unity, as in the rows in
clientele, M/A, is negatively related to a the table that are marked with two aster-
and, hence, positively related to L. Thus, as isks, the peasants in equilibrium would allo-
the equilibrium allocation approaches cate most of their time to insurrection. As a
Pareto optimality, the income distribu- result, the probability of a successful insur-
tion becomes both absolutely and relatively rection would be close to unity, and the
more favorable to the ruler's clientele. The ruler's policies would be able to achieve for
table shows that, as a approaches zero, his clientele, at most, a negligible expected
E/(E + M), M/(M + E), and M/A all ap- income. The rows marked with a single as-
proach one-half. terisk, in which the sum of 0 and a is