Russell Hardin. 1997. Economic Theories of the State

Russell Hardin. 1997. "Economic Theories of the State," in Dennis C. Mueller, ed., Perspectives on Public Choice: A Handbook, New York: Cambridge University Press, pp. 21-34.

I. Economic Theories of the State

1. Public goods theories -
• Involves one or both of two claims:
• Certain characteristics of public goods require that they be provided by a central agency acting on behalf of the larger group of beneficiaries
• Collective provision merely has advantages over individual provision
2. Coordination theories - 
• Counterpoint to the public goods theory; much of what makes the state plausibly valuable is not its provision of genuine public goods, many of which can successfully be provided by market devices. The state often just helps in the coordination of the multiple provision. That is the value of the state.
• In explanations of the rise of the state, coordination interactions have a conceptually prior status; without substantial coordination to produce order there is likely to be little exchange, hence little successful collective action. 
• Coordination theories of the state are distinctively different from public goods and prisoner's dilemma theories because once coordination by the state establishes social order and enables us to do other things successfully (all drive on the same side of the road), no one can free ride on the order created by others and everyone faces a net expectation of personal loss from going against that order.
3. Prisoner's Dilemma theories - 
• Prisoner's dilemma is the game theoretic model of dyadic exchange interactions when there are potential gains from trade. 
• In Hobbes theory, government is there to prevent unilateral appropriations of goods; this allows exchange to reduce to a matter of coordination in which both traders move to become better off as compared to their condition in the status quo before exchange.
• While the two-person prisoner's dilemma is resolvable with cooperation when iterated, the n-persons prisoner's dilemma for large n is not resolvable and requires the law and its regular application.
4. Evolutionary stability theories - states arise through successes in survival
• If the condition of anarchy is sufficiently chaotic and destructive of productivity and wealth, as Hobbes assumes, then the critical move of the public goods theory is the initial creation and maintenance of a viable state; but this must be the result of social evolution and coordination.
• Social-evolutionary account of the state: if a state takes on the task of some collective provision that gives the state greater survival value in the competition with other states and with potential anarchy, then the relevant collective provision tends to support that state. The capacity of the state to provide collective goods may be critical for its survival even if not for its origins. Provision of goods such as roads and coordinations such as order makes life enormously better, partly by stabilizing expectations and partly by elevating general welfare.