Butter and guns: Complementarity between economic and military competition
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This paper analyses a general-equilibrium model of the complementarity between economic competition for the allegiance of subjects and military competition for the control of land. In our model economic competition between rival rulers for the allegiance of subjects results in their subjects, whether they are producers or soldiers, receiving incomes equal to the value of the marginal product of a producer. Furthermore, abstracting from destruction, military competition for the control of land, to the extent that it shifts some subjects from producing to soldiering, increases the value of the marginal product of a producer. Consequently, as long as military competition is not too destructive, the subjects of rival rulers have higher incomes with both military and economic competition than with economic competition alone. Economic competition for the allegiance of subjects causes rival rulers to bear all of the cost of allocating production to military competition and to bear more than the cost of the foregone production of soldiers.
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