The Underpants Gnomes Theory of the State

You might be familiar with the underpants gnomes business plan from South Park:

It occurred to me that the prisoners’ dilemma (PD) justification of the state has a similar logic. The traditional story says that life in the state of nature is a PD, where everyone has the incentive to cheat rather than cooperate. But since everyone would be better off cooperating, they have an incentive to form a government that forces them to cooperate. Or, the underpants gnomes theory of the state:

1. People in the state of nature would benefit from establishing a government.
2. ???
3. Therefore, government.

What this justification skips over is an explanation of how people could establish a government. Government is treated as a deus ex machina, an “external” institution that is simply “given.” The traditional story throws rational choice out the window: instead of resulting from individual actions, government just magically pops into existence when its total social benefits outweigh total social costs.

(The absence of an explanation of the emergence of government from a PD game is quite puzzling when you think about it, since it’s not obvious how players in a PD could cooperatively set up a government when defecting is the dominant strategy.)

Jason Briggeman, in his paper “Governance as a Strategy in State-of-Nature Games,” (ungated) sets out to remedy this situation by providing the beginning of a rational choice model of the establishment of government. He creates a modified PD game, what he calls the “Prisoners’ Dilemma with Coercion,” where players have the option to adopt a coercive strategy and impose a strategy choice on another player.

As he writes: “To model this Hobbesian situation with the tools of game theory, it would seem to be required that society’s governor be an internal player who chooses strategies, not an external model-builder who sets payoffs.” It strikes me as odd that, given the widespread belief in the necessity of the state, something as important as a rational choice explanation for the emergence of government could have been ignored for so long.

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Intranational Anarchy

The concept of international anarchy is well known: in the absence of a world government, the various states of the world relate to each other under conditions of anarchy. There is no ultimate authority to resolve disputes or enforce law among the governments of the world. Hence any cooperation between states must be cooperation under anarchy, without the intervention of a world government.

While it is commonly recognized that there is anarchy between governments, it is less well known, but equally true, that there is anarchy within governments. That is, just as the agents of different governments are in a state of anarchy vis-à-vis each other, so too the agents of the same government are in a condition of anarchy in their relationships with each other.

For example, under international anarchy, an agent of the Canadian government and an agent of the U.S. government interact without a world government governing their relationship.

Now consider two agents of the U.S. government. In their interactions with each other, they cooperate without some higher government ruling over them. Call this intranational anarchy: the agents of a single government are in a state of anarchy vis-à-vis each other. (See Cuzán’s paper “Do We Ever Really Get Out of Anarchy?“.)

On the classic Hobbesian account, cooperation and social order are not possible under anarchy. Without some ultimate third party authority to force people to respect property rights and fulfill contracts, cooperation is impossible and society breaks down into chaos.

When we observe governments and intranational anarchy around the world, the extreme Hobbesian prediction is clearly wrong. The internal relations of most governments, though anarchic, are fairly peaceful, and politicians do not battle each other in a war of all against all. So the question is: given that the internal relationships of a government are anarchic, how can cooperation and social order within a government be secured?

We know that the strict Hobbesian position is false. In small groups with repeated interactions and low discount rates, people will self-interestedly cooperate and respect contracts. Under these conditions, social order is possible without a state.

Can the logic of repeated interactions and reputation be used to explain social order in intranational anarchy? The answer seems to be yes.

The number n of the true rulers of the state, those who control its coercive power, appears to be small enough for repeated interaction to generate cooperation. And in running the government, the rulers are in fact in repeated interactions with each other, so cooperation would be the dominant strategy.

In addition, the nature of the organization of the state can explain cooperation. By cooperating to run the government, the rulers can enrich themselves by taxing the general population; by comparative advantage, this would be their most profitable employment. Hence a sort of honor among thieves brings incentives to cooperate.

One problem with this explanation is drawing the boundary between the rulers and the ruled. How do we identify the individuals that make up n? At what point does a government agent cease to be a ruler and become one of the ruled? A general in the military is definitely one of the rulers. A low-level bureaucrat in the post office is definitely one of the ruled. So the dividing line must be somewhere between the two. It seems that control over the coercive power of the state is the key. The more such control a government agent has, the more they are part of the rulers.

In sum, thinking about how government agents cooperate in intranational anarchy can illuminate our understanding of the state. One question for future research is explaining how the police and the military, as agencies of organized violence, can cooperate with each other.