War, Wealth and the Formation of States
The literature on state formation includes two strands of research. Macrohistorical sociology stresses the impact of war (directly or mediated by underlying institutions or social factors) on state formation (Hintze, Tilly, Ertman, Downing, Spruyt, etc.). More recently, game theory models examine the impact of economic integration (in the context of preference heterogeneity) on the size of states (Roland, Alesina). Although both literatures have made important contributions, they present two weaknesses: the first type of work is imprecise about the causal structure of its arguments; the game-theoretic literature has to resort to highly unrealistic assumptions to solve its games.
In our paper we suggest a different theoretical and methodological approach to the question of state formation. Going back to war as the main driving force of state formation, we first formalize with more precise analytical foundations the macrohistorical literature: we define the benefits and costs of territorial expansion, the utility functions of state rulers (authoritarian and democratic), the effects of technological shifts in the production of violence, and the types of economic activities (and assets) that serve as the basis of expansion (here we crucially differentiate between elites that specialize in conquest and elites that specialize in trading and industrial activities). We then apply these concepts to develop an agent-based simulation in which we track how the changes in our parameters account for differences in the evolution of both the number and size of states over time.
The paper partially builds on previous work by Cederman (1997) that also applies agent-based simulation to state formation processes. Nonetheless, we depart from Cederman’s in various regards – mostly in characterizing different types of states in terms of its domestic or internal conditions (political regime, population densities, economic profiles, nature of assets). This richness in the economic and political parameters of our units allows us to explain the causes of the different distributions of states that emerged spatially and temporally in Europe and other continents.