by Jared Rubin
For some rules, simply knowing who establishes them is sufficient to understand why people follow them. If the person enacting the rule is one who is widely believed to have the legitimate right to do so, then people will follow the rule because they believe that it is the right thing to do.5 For instance, European kings historically made proclamations or decrees that their subjects generally followed as long as the proclamations were within the realm of what a legitimate king had the right to enact. Likewise, Ottoman sultans often issued decrees to supplement Islamic law. These decrees formed a corpus of law known as the kanun, which had authority largely due to the legitimacy of the sultan. In most modern democracies, citizens believe that elected officials are legitimate because they are in office due to the “will of the people,” and they thus have the right to legislate. People follow all sorts of religious rules because a legitimate religious authority favors it. Christians abstain from certain practices during Lent and Muslims fast during Ramadan due to beliefs that it is the “right” thing to do. In such cases, there may be explicit sanctions for disobeying the authority figure, but such sanctions do not always need to be in place to encourage rule following. Instead, individuals follow rules because someone whom they believe has the right to set certain rules of behavior establishes them.
In other cases, the enforcement of rules is a much more important determinant of why people follow them, regardless of who sets them. It is costly to break rules when doing so may lead to imprisonment, physical brutality, or confiscation of wealth. This is why rulers often invest in police and military force, especially if their legitimacy is weak. One needs to look no further than the autocratic states of the pre–Arab Spring Middle East to find examples of weakly legitimized rulers supporting their rule via force. When people follow rules due to coercion, the identity of the person or organization who establishes the rules is irrelevant as long as the punishment associated with breaking the rules is credible.
It is often the case that legitimacy and coercion work in tandem to encourage rule following. Many people follow laws imposed by rulers because they believe the rulers have the right to impose laws and they know what the punishments are if they break them. But knowing why people follow rules and what type of rules they will follow is only a small part of the overall story. If the only types of laws and policies that are enacted are ones that are followed to some degree, this still leaves a wide range of possible rules that can be successfully implemented, and this range increases as the ruler gains legitimacy or coercive power. The next question, then, is: Which laws and policies do rulers choose out of their many available options?
A more “economics” way of asking this question is: What gives rulers utility? Historically, rulers sought to achieve many goals: raising tax revenue, conquering territory, basking in their own glory, providing protection to their subjects, and giving favors to constituents. For the sake of simplification, assume the aim of all of these actions is achieving one goal: propagating rule. Simply put, any factor that keeps a ruler in power propagates his or her rule.6
The implication is that rulers choose rules – within the set of those that people follow – that best propagate their rule. A particularly gruesome example is the practice employed by numerous Ottoman sultans of having their half-brothers murdered upon ascending to the throne. The incentive for new sultans to have their kin murdered was to prevent rival factions with claims to the throne from forming during the sultan’s reign – in other words, to increase the probability that the new sultan stayed in power. Less dramatic and more ubiquitous examples of laws and policies enacted in order to propagate rule include building up military force; spending on public goods such as roads, bridges, parks, and education; giving privileged government positions to the economic, religious, and political elite; and imprisoning those who publicly dissent against the regime.
To summarize, rulers primarily desire to propagate their rule, although they may have other motivations. A primary means of propagating rule is through rules that increase the likelihood they will stay in power. People follow these rules because the ruler is legitimate, has access to some coercive power, or both.7 Figure 2.1 summarizes this logic.
Figure 2.1 Rulers’ Desires and How They Are Accomplished
The foregoing discussion has left out an important feature of this process: how rulers attain legitimacy and coercion. It is useful to think of legitimacy and coercion as intermediate goods, meaning that they are the products of some production process, while there is another process in which they are an input into the production of the propagation of rule. Legitimacy can come from numerous sources. One source is what Max Weber (1922) called the “traditional grounds of authority,” which are based on a widespread belief held in society’s traditions. For example, being an heir to the throne has historically been an important source of “traditional” legitimacy in societies all around the world: subjects perceive an heir as having a right to rule that non-heirs do not have. Another source of legitimacy is what Weber called “charismatic grounds of authority,” which are based on personality traits and achievements. A strong personality or record of achievement can give a ruler legitimacy when it strengthens the devotion of his or her people. Genghis Khan, Napoleon, Alexander the Great, Elizabeth I, and Saladin are all examples of individuals who legitimized their rule in part by the strength of their personality and achievements.
It is also possible for outside individuals or groups to confer legitimacy onto the ruler. Any individual or group who can bolster subjects’ beliefs in the ruler’s right to rule are called legitimizing agents.8 Legitimizing agents are individuals or groups that people turn to for guidance due to some characteristic that makes people believe that their guidance is worthwhile to take. Legitimizing agents are by definition elites, since they can influence how people act.
Historically, one of the most important types of legitimizing agents were religious authorities.9 The medieval Catholic Church could turn a king into an emperor; for instance, the Pope generally crowned the Holy Roman Emperor in Rome. The Pope dubbed Isabella and Ferdinand of Spain the “Catholic Monarchs” after they expelled the Muslim Moors from Spain and used the Inquisition to expel the Jews and Jewish converts. Medieval and early modern Middle Eastern rulers were also renowned for using religious authorities to bolster their legitimacy. They often acquired fatwas from important muftis before doing anything controversial, since fatwas were powerful proclamations that Muslims should abide by the ruler’s policies. For example, the famous Ottoman mufti Ebu’s-su’ud (1490–1574) was asked by the sultan for fatwas on controversial actions ranging from licensing an attack on the Venetians to approving the consumption of coffee, and the Abbasid caliph al-Muntasir (r. 861–62) secured a fatwa from top Iraqi religious scholars before hatching a plan to assassinate his father, the reigning caliph.10
Any elite with the power to influence people’s opinions about their obligation to follow the ruler can serve as a legitimizing agent. Local elites, such as tribal elders or the landed elite, often act as legitimizing agents. They can confer legitimacy to the ruler because they have influence over the local population. For instance, the Ottoman sultan used local notables to propagate his rule in the provinces after the seventeenth century. The notables had local power due to tribal or military ties and were thus able to collect taxes and provide law and order that the sultan may have otherwise been unable to provide. These types of legitimizing agents have the capacity to legitimize rule based on what Weber (1922) called “rational grounds,” which relies on “a belief in the legality of enacted rules and the right of those elevated to authority under such rules to issue commands.”
Rulers can also use coercive agents to propagate their rule. These are individuals or groups with the power to enforce laws and policies through coercion. Examples of coercive agents include military elite, police officials, and warlords. Such individuals impose the ruler’s will by force, often after the ruler enacts unpopular policies. For instance, Ottoman su
ltans gave their cavalry elite large tracts of land under the timar system, and in return the latter collected taxes and dispensed justice. Feudal lords in medieval Europe had a local monopoly on force, which they used to provide protection and local order in return for rights to collect the fruits of the land. Rulers use militaries throughout the modern Middle East to quash dissent and keep themselves in power. Together, legitimizing agents and coercive agents make up a broader class of actors called propagating agents.
Why do propagating agents propagate rule? What is in it for them? Propagating agents do not support the ruler without expecting something in return; they are “paid” in laws and policies that benefit their interests. When enacting rules, a ruler must cater to the interests of his propagating agents if he wants the same agents to propagate his rule in the future. If a ruler is powerful because the military terrorizes the citizenry, the ruler would be unwise to promote rules that upset the military. Indeed, members of the Janissary corps murdered more than one Ottoman sultan who attempted to reform the corps. Likewise, a ruler who is ordained by the religious establishment as ruling by divine right would find enacting laws contrary to religious doctrine quite costly, since it might undermine beliefs in his divineness. Eric Chaney (2013) provides a fascinating example of such a bargain. In a study of Islamic Egypt from the twelfth through the fourteenth century, he finds that religious authorities were less likely to be replaced when the Nile River was either much lower than normal (meaning drought-like conditions unsuitable for agriculture) or much higher than normal (meaning flooding). The intuition is straightforward – it was precisely in those times when food was scarce that the ruler was most vulnerable to revolt. The benefit of religious legitimation was greatest at such a time, because religious authorities could dissuade the populace from revolting. As a result, religious authorities had a greater say in the bargain over laws and policies during Nile failures: “[During a failure] the sultan would bow to … pressure [from the head judge] and enforce decrees against … prostitution, hashish eating, beer drinking, the wearing of immodest or over-luxurious dress [or] Christian and Jewish functionaries lording it over Muslims.”11 Figure 2.2 extends upon Figure 2.1 to summarize the interactions between all of the relevant players in such a setting.
Figure 2.2 How Rulers Propagate Rule
There is, therefore, an intimate relation between the types of rules that a ruler enacts and the identity of his propagating agents. When religious authorities propagate rulers, laws aligned with religious precepts and policies that keep religious authorities in power are likely to result. Religious authorities desire policies favoring religious precepts because such policies make it easier for them to maintain moral authority over the population. When Muslim rulers impose Islamic law, religious authorities benefit because the rules they tell individuals to follow are also the laws of the land. The policies that religious authorities want rulers to enact are occasionally growth-enhancing, such as support for the poor and education or prohibitions on violent acts. Their desired policies are also sometimes growth-retarding, such as restrictions on taking interest, rent-seeking, and prohibitions on certain actions taken by women.
The relationship between military propagation and economic outcomes is also mixed. On the one hand, merchants are much more likely to send expensive goods long distances if they are reasonably secure that naval power will protect them from piracy and overland travel is free from banditry. For instance, the Mongol invasions of the thirteenth century were largely destructive, but the “Pax Mongolia” they ushered in by placing much of Eurasia under the rule of one empire expanded the flow of ideas, techniques, goods, and people.12 On the other hand, propagation by military elites can be bad for economic growth, as the Mongol destruction of many parts of Eurasia attest. The military can also suppress citizens – and economic activity – since they have an advantage in employing violence.
Propagation by the economic elite is more likely to lead to economic success because their motivations align to a greater degree with economically beneficial laws and policies. It is not because the economic elite are smarter or have the interests of the nation at heart more than other types of propagating agents. Quite to the contrary, it is precisely because they look out for their own self-interest that they contribute to overall economic success. While it is certainly true that the economic elite desires damaging policies such as handouts, monopolies, and other privileges, it is also true that public good provision, secure property rights, and impartial law and order benefit the economic elite more than they do other segments of society.
How the propagating process results in specific laws and policies is by no means simple. An analysis of this process must consider the ruler’s various alternatives in propagating agents, how their policy desires affect these choices, and the nature of the quid pro quo between the various actors. These interactions quickly become complicated, and they depend on a host of variables that are different in different circumstances. Fortunately, economists have a tool – game theory – to help analyze situations in which individuals or groups interact strategically.
Game Theory and the Role of Institutions
The situation described in the preceding section is comprised of numerous actors, each with their own, often conflicting motivations. Each of these actors must take into account how the others will act and react when making their own decisions. In other words, when these actors get together to formulate laws and policies, they act strategically. Their interactions are therefore well suited for a game theoretic analysis.
Game theory is the study of how people and organizations act in strategic settings. Economists have used it to gain insight into all sorts of settings where economic actors have to account for the actions of others when making decisions. It is used to show how firms set prices, where firms locate, how markets for kidney donations work, why people marry their partner, how soccer players decide in which direction to kick a penalty, how countries negotiate over peace, and even why countries choose whether or not to detonate nuclear bombs. In the setting described earlier, game theory can shed light on how rulers interact with their propagating agents under varying conditions.
Thinking in game theoretic terms is valuable because it focuses attention on the salient aspects of the relationship between rulers and their propagating agents. The point is not to capture all of the factors that go into a decision, but to focus on the driving forces. This entails addressing numerous questions. First, who are the relevant players? Second, what are their motivations? Third, what is the relationship between the players? Fourth, how do these interactions help them achieve their goals?
A game theoretic framework answers each of these questions. Once the framework is established, it is possible to analyze how the players act under different settings. In the present situation, it is possible to craft a general game where the relevant players are a ruler and propagating agents. Generality has its limits, though. When studying the situation in medieval Europe or the Middle East, the identity of the propagating agents matters. In medieval Europe, the Church, economic elite, and the military propagated kings. In the Middle East, religious authorities and the military were the primary propagating agents. Knowing the identity of the relevant players is important because it informs us about their motivations as well as their relationship with the ruler.
When solving game theoretic models, economists usually focus on states of the world in which all of the players’ actions are consistent with their motivations and the actions of others. In other words, they focus on equilibrium actions. An equilibrium is a state of the world where nobody has incentive to do anything different than what they are currently doing. In the context of the present framework, an equilibrium occurs when the ruler gets the best bargain he can, given his desires and how his agents act in the bargaining process, while the agents get the best bargain they can, given their desires and the actions of the ruler.
A key component of the game theoretic framework proposed in this ch
apter is the outside, or exogenous, factors that affect the incentives of the players. One of the most important of these factors is the society’s institutions. A simple and powerful definition of institutions, proposed by Douglass North (1990), is that they are the rules of the game, means of enforcement, and players of the game.13 Institutions come in many forms. They may be political, economic, religious, social, legal, or penal. Medieval manorial courts provide a straightforward example of a legal/economic institution: they resolved disputes between those living on the manor, each court had its own laws based on the custom of the manor, and the lord generally presided over cases. Hence, these courts provided the rules of the game (they helped specify which laws would be enforced), the means of enforcement (the losing party could be punished by the lord), and the relevant players.
In other words, institutions place constraints on human behavior. These constraints influence behavior because they affect the costs and benefits of different actions. For instance, rulers are much more likely to propagate their rule via religious legitimation if the “rules of the game” are such that religious doctrine is consistent with permitting religious legitimation. In such a case, the benefit of religious legitimation is greater than if there were no doctrine whereby religion could ordain rulers.
How institutions affect interactions between rulers and their propagating agents is only half of the story. Institutions also evolve over time along with the rules of the game they impose. Over long periods, institutions change when people stop following the old rules of the game and start following new rules created by new institutions.14 Such change is often good for an economy: institutions that change to reflect economic conditions incentivize behavior that puts economic inputs to their most highly productive use. Conversely, if institutions do not adjust to their surroundings, the rules of the game do not change to account for economic realities, and economic opportunities are likely to be lost. Why does this happen? Why do institutions sometimes fail to change when economic conditions change?