American Economic Association

A General Equilibrium Model of Insurrections

Author(s): Herschell I. Grossman
Source: The American Economic Review, Vol. 81, No. 4 (Sep., 1991), pp. 912-921
Published by: American Economic Association
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 A General Equilibrium Model of Insurrections

By HERSCHEL I. GROSSMAN*

This paper develops a positive theory of insurrections that treats insurrection

and its deterrence or suppression as economic activities that compete with
production for scarce resources. The general equilibrium analytical framework
reveals how the allocation of labor time among insurrection, soldiering, and
production and the probabilistic distribution of income between the peasant
families and the ruler's clientele both depend on the technology of insurrection.
A central result is that equilibria with more time allocated to insurrectionand a
higher probability of a successful insurrection have lower production and total
income but nevertheless can have higher expected income for the peasants.
(JEL H56, D78)

From ancient times to the present, history
records numerous insurrections involving
the unlawful use of force to defy the estab-
lished system of property rights and taxa-
tion. This paper develops a positive theory
that treats insurrection and its deterrence
or suppression as economic activities that
compete with production for scarce re-
sources. To account explicitly for resource
constraints, the analysis is developed within
a general equilibrium framework. In addi-
tion, the analysis is explicitly choice-theo-
retic.
The principals in this theory are a ruler
and a large number of peasant families. The
ruler enforces the collection of land rents
and/or taxes on productive labor. The ruler
also employs soldiers in order to reduce the
probability of a successful insurrection. The
ruler's objective is to maximize the expected
income of his clientele, who include prop-
erty owners and other politically favored
groups. The peasant families respond to the
ruler's policies by allocating their labor time
to production, soldiering, or participation in
*Department of Economics, Brown University,
Providence, RI 02912. Edward Buffie suggested the
idea for this paper based on the example of the Sendero
Luminoso movement in Peru. I am indebted to Harl
Ryder for helpful modeling suggestions and for gener-
ous technical assistance. I also received helpful com-
ments from Oded Galor, Dan Usher, seminar partici-
pants at Wesleyan University, and anonymous referees.
912
an insurrection with the objective of maxi-
mizing their expected income. In a success-
ful insurrection, the insurgents take as booty
all of the revenue of the ruler and his clien-
tele.
The interaction between the ruler and
the peasants generates an equilibrium allo-
cation of labor time among production, sol-
diering, and insurrection and a probabilistic
distribution of income among rents and
taxes received by the ruler's clientele, net
earnings of productive labor, wages of sol-
diering, and booty taken by insurgents. The
equilibrium on which the analysis focuses is
a noncooperative solution to a one-shot
game between the ruler and the peasants.
The analysis reveals how the allocation of
time and the probabilistic distribution of
income depend on the technological param-
eters that govern production and insurrec-
tion.
The theory emphasizes the expected pri-
vate returns to insurgents. Specifically, the
analysis assumes that only active insurgents
share in the booty taken in a successful
insurrection. In this respect, the present
theory contrasts sharply with theories that
assume that successful insurrections pro-
duce mainly social benefits from which ac-
tive insurgents cannot exclude nonpartici-
pants. These social-benefit theories stress
the importance of such factors as
"ideology," class identification, and anomie
in overcoming the free-rider problem asso-

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VOL. 81 NO. 4 GROSSMAN: GENERAL EQUILIBRIUM MODEL OF INSURRECTIONS
ciated with nonexcludability. For example,
in his elegant analysis of revolution as a
two-person game, John E. Roemer (1985,
1988) "endows Lenin with a charisma which
enables him to convince people to behave
cooperatively" (1988 p. 234) and to join the
revolution against the Czar even though
people who do not risk the Czar's wrath by
joining also will benefit from Lenin's pro-
gressive program if the revolution succeeds.
(Interestingly, Gordon Tullock [1974 p. 45]
points out that the real Lenin did not count
on being able to overcome the free-rider
problem and that actually "Lenin is famous
for having developed the idea of profes-
sional revolutionaries.") Because social con-
sequences do not preclude private returns
as well, it seems appropriate to view theo-
ries (like the present one) that emphasize
private returns and theories that emphasize
social consequences as complementary.
The present theory also emphasizes that
time allocated either to soldiering or to
insurrection, although it can be privately
useful in influencing distributive shares, is
socially wasteful. In this respect, the theory
goes beyond existing choice-theoretic mod-
els of insurrections, such as Dan Usher and
Merwan Engineer (1987) and Usher (1989),
as well as Roemer (1985, 1988), that con-
sider only distributive consequences and that
implicitly assume that insurrection and its
deterrence and suppression do not reduce
productive activity. The present theory also
contrasts with the models of Jack Hirsh-
leifer (1988) and Michelle R. Garfinkel
(1990), who analyze the effect of technology
on the allocation of resources between pro-
ductive efforts and appropriative efforts, but
who treat the struggle over distributive
shares as a two-party contest between com-
peting rulers and do not analyze the behav-
ior of the subjects.
The analysis that follows defines insurrec-
tion generally to include any forceful action
against the established system of property
rights and taxation. This definition does not
distinguish between rebels or revolutionar-
ies (terms that suggest an attempt to seize
powers of sovereignty in order to effect a
once-for-all alteration of property rights and
taxation) and bandits or pirates (terms that
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913
suggest merely an attempt to alter the in-
come distribution associated with existing
property rights and taxation). In actual
cases, this distinction can be blurred (see,
for example, the discussion of premodern
China in James Tong [1988]).
The theory also does not consider the
questionof how-that is, by what combina-
tion of force and common consent-the
ruler initially achieved the legal right to
enforce a systemof propertyrightsand tax-
ation. The importantpoint is that, even if
the citizenryvoluntarilysubjecteditself to a
rulerwith the intentionof securingessential
social benefits, such as the provisionof law
and order and other public goods, the ruler
with his sovereignpowers in hand is legally
free to pursue the self-interestof his clien-
tele. EdwinS. Mills (1986 p. 138) points out
that we can "makemuchof historyintelligi-
ble" by assuming"that governmentsextract
from economies under their jurisdictionas
much surplusor output as possible and use
this surplus to benefit the smallest group
possible."
As already noted, although the analysis
derives a deterministic allocation of re-
sources,it derivesonly a probabilisticdistri-
bution of income. Specifically,the analysis
determineswhether or not an insurrection
occursbut only determinesits probabilityof
success.The present paper is not concerned
with the idiosyncraticfactors that help to
determinethe actualoutcomesof particular
insurrections.In a complementaryanalysis,
TimurKuran(1989) models the role of ran-
dom events and social psychologyin helping
to determine the success of insurrections
and discussesspecifichistoricalexamples.
I. The Economy and the Ruler
Consider a simple production economy in
which each of a large number of small iden-
tical peasant family units can divide the
labor time of its family members among a
nonnegative fraction 1 devoted to produc-
tion, a nonnegative fraction s devoted to
soldiering,and a nonnegativefraction i de-
voted to participation in an insurrection.
(The analysisdoes not distinguishbetween
familiesin which individualsengage in more
914 THE AMERICAN ECONOMIC REVIEW
than one activity and families who assign
different family members to different activi-
ties.) Although we can interpret this setup
as the usual representative-agent abstrac-
tion, anectodal evidence suggests examples,
such as the Sendero Luminoso insurrection,
in which actual peasant families apparently
devote positive amounts of time to each of
these activities.
The Pareto optimal allocation of time in
this economy-that is, the allocation that
maximizes total production-is (L, S, I) =
(1,0,0), where L, S, and I represent the
nonnegative fractions of time that families
on average devote to production, soldiering,
and insurrection, respectively. Any time de-
voted either to soldiering or to insurrection,
although it can be privately useful in influ-
encing distributive shares, is socially waste-
ful. The condition (L, S, I) = (1, 0, 0) obtains
if and only if (1, s, i) = (1, 0, 0) for all peasant
families.
The income of the ruler's clientele, mea-
sured per peasant family, is either r - wS
with probability 1- 3 or zero with probabil-
ity /3, 0 < / ? 1, where r represents total
taxes or rents per family received by the
ruler and his clientele, w is the wage rate of
soldiers, and /8 is the probability of a suc-
cessful insurrection. As noted above, this
setup assumes that in a successful insurrec-
tion the insurgents take as booty all of the
revenue of the ruler and his clientele. Pro-
duction per family is a linear function AL,
where A is a positive technological parame-
ter that measures productivity. Thus, r =
xAL, 0 < x < 1, where x represents the
fraction of output that is collected from
each peasant family as land rents and taxes.
(The discussion that follows usually refers
to x simply as the tax rate and to r simply
as tax revenue.)
The ruler's objective is to maximize M,
the expected income of his clientele, where,
on the above assumptions,
(1) M = (1-/)(r-wS)
= (1- /)(xAL - wS).
Equation (1) says that M equals tax revenue
minus wage payments to soldiers times the
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SEPTEMBER 1991
probabilityof there not being a successful
insurrection.The ruler'spolicy instruments
are x, w, and S. (If x includes land rents,
then this setup assumes that the system of
property rights allows property owners to
set the rental share collusively.This setup
also abstractsfrom the requirementthat the
announcedtax rate or rental share must be
time-consistent.For complementaryanaly-
ses that allowfor a bindingtime-consistency
constraint,see Grossmanand Suk Jae Noh
[1990, 1991].)The timing of actions in this
economy is as in a principal-agent model,
with the ruler (as principal)movingfirst by
choosing the policy instruments and the
peasant families (as agents) moving second
by respondingto the ruler'spolicy choices.
Thus, in making his policy choices, the ruler
takes as given the behavioralresponses of
the peasantfamiliesto his policies as well as
the technology of production, summarized
by the parameterA, and the technologyof
insurrection.
II. The Peasant Families
A peasant familycan obtain income from
production,from soldiering,or from partici-
pation in an insurrection.A family's net
incomefromproductionis (1- x)Al. A fam-
ily's income from soldiering is either ws
with probability1- /8 or zero with probabil-
ity /8. This setup assumes that soldiers are
able to drawtheir pay only if there is not a
successful insurrection.Finally, a family's
income from participationin an insurrec-
tion is either ri/I with probability/8 or
zero with probability1-,/. This setup as-
sumes that insurgents divide their booty
among families proportionatelyto the time
devoted by each familyto the insurrection.
The analysisdoes not attempt to explain
how the distributionof the booty taken by
insurgentsis enforced, and more generally,
it takes the organizationalstructureand co-
hesion of insurrectionsas given. (For more
on these issues within discussionsthat em-
phasize private returns to insurgents, see
Samuel L. Popkin [1988]and Michael Tay-
lor [1988].)The present setup also assumes
that the only cost associatedwith insurrec-
tion is the productionforgone by devoting
VOL. 81 NO. 4 GROSSMAN: GENERAL EQUILIBRIUM MODEL OF INSURRECTIONS 915

time to the insurrection. This assumption activity whose expected return is more than
seems realistic to the extent that individual the expected returns from both of the other
insurgents can avoid retribution by easily activities. (The peasants' problem could be
blending back into the general population. generalized by making production risky or
(See Roemer [1985, 1988] for a complemen- subject to diminishing returns or by intro-
tary analysis in which the ruler can penalize ducing risk aversion, but these complica-
unsuccessful insurgents.) tions would seem not to alter the main
Each family takes x, A, /3, w, r, and I as results derived below.)
given and chooses 1, s, and i, subject to the
constraint 1 + s + i = 1, to maximize its ex- III. The Technology of Insurrection and Its
pected income, e. On the above assump- Suppression
tions, e is given by
To model the probability of a successful
(2) e=(1-x)A1+(1-f3)ws-+4-3ri/I. insurrection, /3, a natural assumption is that
,8 is an increasing function of I, the fraction
Given equation (2), the Kuhn-Tucker condi- of peasant time allocated to insurrection,
tions for family choices imply (i) that the and a decreasing function of S, the fraction
allocation of time to production by each and of peasant time allocated to soldiering. A
every peasant family satisfies plausible form for this function is
11-0
(0 for (1-x)A < Y
(4) /3=
1 for (1- x)A =Y O,I<1,O<cr<1.
(3a) [0,1]
t1 for (1-x)A > Y Given the form of equation (4), /8 is
bounded between zero and unity. The pa-
where Y max[(1- ,8)w, ,fr/I]; (ii) that the rameters 0 and a- in equation (4) represent
allocation of time to soldiering by each and the technology of insurrection. For given
every peasant family satisfies values of I and S between zero and unity,
/3 is larger the larger is 0 and the larger is
for w <W a. Moreover, the assumption that 0 is less
f i0 than unity implies that /8 is positive if and
(3b) S= [0,1] forw=W
only if I is positive and that /8 is increasing
t1 for w > W in I. The possibility that 0 equals zero pre-
sents an interesting special case, as will be
where ( -,B )W max[(1 - x)A, ,fr/I], and seen in the following section. The assump-
(iii) that the allocation of time by each and tion that a- is positive implies that, if I is
every peasant family to participation in an positive, then /8 is less than unity if and only
insurrection satisfies if S is positive and that /8 is decreasing in
S. As will be seen, the assumption that a- is
0O for ir/I<Z less than unity insures that a positive value
(3c) i [0,1] for fr/I=Z of M is feasible. (An extended analysis could
relate 0 and a- to such factors as qualitative
t1 for 3r/I > Z
human characteristics, geography, and the
quantity and quality of armaments.)
where Z = max[(1 - x)A,(1 - )w]. The elasticity of /8 with respect to I equals
Equations (3a), (3b), and (3c) indicate, the nonnegative fraction (1 - 0)(1 - /3), and
among other things, that a family would the elasticity of /8 with respect to a-
devote none of its time to any activity- equals the nonpositive fraction - a (1 - /3).
production, soldiering, or insurrection- Thus, the ratio (1 - 0)/a represents the
whose expected return is less than the ex- percentage increase in the fraction of time
pected return from either of the other activ- devoted to soldiering that is needed to
ities and would devote all of its time to any counteract the effect on /3 of a 1-percent

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916 THE AMERICAN ECONOMIC REVIEW SEPTEMBER 1991

increase in the fraction of time devoted to aM aM aM

insurrection. (6c) a- <- = -
According to the specification of the ex-
pected income of a peasant family, given by with I=0, (L,S) > (0,0),
equation (2), the expected return to a family
from time allocated to insurrection equals and L+S=l;or
,fr/I. From equation (4), one can calculate
that aM aM dM
(6d) -<-=-

,fr xAL
with S = O, (L, I) > (0,0),
'~~~
's I ISI,
and L+I=1;or
Equation (5) implies that, for given positive dM dM dM
values of x, L, I, and S, the expected (6e) - < - > -
return to insurrection is larger the larger is aS - aL - aI
0 and the larger is oa. Equation (5) also
with I= S = 0 and L = 1; or
implies that with 0 > 0 the expected return
to insurrection evaluated at I = 0 would be dM dM dM
infinite but that with 0= 0 the expected - < - > -
(6f) aL -dI -
return to insurrection evaluated at I = 0 aS
equals rS-, which for S > 0 would be fi-
nite. with L= S=O and I= 1; or

IV. PolicyChoices dM dM dM
(6g) '<
aL S ->2 aI
The ruler's problem is to choose the pol-
icy instruments- x, w, and S -to maximize with L=I=Oand S=1.
M, as given by equation (1), subject to the
constraints given by equations (3a), (3b), To begin analyzing these Kuhn-Tucker
(3c), and (4). This problem is equivalent to conditions, note that conditions (6b), (6f),
the problem of choosing L, S, and I to and (6g) can be ruled out because L = 0
maximize M, subject to (L, S,I) 2 (0,0,0) would imply r = 0 and, hence, M = 0. The
and L + S + I = 1, where equations (3a), ruler would not choose to induce the peas-
(3b), and (3c) relate x and w to L, S, and I ants to denote zero time to production.
and equation (4) relates f8 to S and I. The Note also that one can rule out condition
Kuhn-Tucker first-order conditions for this (6d) because, with I > 0, S = 0 would imply
problem are , = 1 and, hence, M = 0. If the peasants
were devoting positive time to insurrection,
dM aM aM the ruler would not choose zero soldiering
(6a) ra=-=- time.
Next, observe that condition (6f) can be
ruled out, because from equation (5) the
with ( L, S, I) > (0, 0, 0), ratio 8fr/I evaluated at r > 0 and I = S = 0
and L+S+I=l;or would be infinite. Thus, I = S=0 would
contradict equations (3a) and (3c). If the
peasants were devoting zero time to both
aM aM
(6b) -< =adM insurrection and soldiering, the expected re-
dL dS dI turn from insurrection would be larger than
the return to production.
with L = 0, (S, I) > (0,0), To continue the analysis of the Kuhn-
and S + I= 1; or Tucker conditions, it is necessary to distin-

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VOL.81 NO. 4 GROSSMAN: GENERAL EQUILIBRIUM MODEL OF INSURRECTIONS
guish the case of 0 = 0 from cases in which
0 is positive. With 0 > 0, condition (6c) can
also be ruled out, because the ratio fir/I
evaluated at r > 0 and S > I = 0 again would
be infinite. Even with a positive amount of
soldiering time, if the peasants were devot-
ing zero time to insurrection, the expected
return from insurrection would be larger
than the return from production. Thus, with
0 > 0 only condition (6a) can be relevant.
With 0 = 0, however, condition (6c) also
can be relevant, because from equation (5)
the ratio fBr/I evaluated at I= 0 equals
rS-, which would be finite for S > 0. Thus,
even if the peasants were devoting zero
time to insurrection, for a low enough tax
rate the expected return from insurrection
would not be larger than the expected re-
turns from production and soldiering.
If Kuhn-Tucker condition (6a) is relevant,
each and every peasant family cannot be
choosing 1, s, or i equal to either zero or
unity. If Kuhn-Tucker condition (6c) is rele-
vant, each and every peasant family is
choosing i equal to zero but cannot be
choosing 1 or s equal to either zero or unity.
Thus, given that either condition (6a) or
condition (6c) is relevant, equations (3a),
(3b), and (3c) imply
(7) (1-x)A = (1- 3)w
and
(8) (1-x)A 2 fr/I
with the equality obtaining for I > 0.
Equation (7) indicates that the ruler faces
an elastic supply of soldiering time at a
wage rate for soldiers such that the ex-
pected return from soldiering equals the
expected return from production. Equation
(8) indicates that the fraction of time that
families on average allocate to insurrection,
if positive, is such that the expected return
from insurrection equals the expected re-
turns from production and from soldiering.
Combining equations (4), (7), and (8) with
equation (1), the partial derivatives are cal-
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917
culated as
AM AI
(9a) -L = (I +L)2[(
(9b) - = AL[(-)
as I?+L [(I?+L)S
and
AM A3L
aI ( I +,BL)2
- (1 - 0)(1 - 18)]
with the equality obtaining for I > 0.
These partial derivatives imply, among
other things, that the ruler's policy choices
and the resulting allocation of time and
probability of a successful insurrection are
independent of A, the productivity of time
allocated to production. This result obtains
because in a closed economy, given L, S,
and I, a change in A changes the return
from production, the expected return from
soldiering, and the expected return from
insurrection equiproportionately. Thus, evi-
dence, as presented for example by Tong
(1988) for premodern China, that local in-
surrections were more likely to occur during
local famines suggests that potential booty
was larger than the emperor's current local
revenues. For example, the potential booty
may have included stores that the emperor
had accumulated from past production or
had shipped in from other regions. In this
event, a reduction in A would have reduced
the return from production proportionately
more than it would have reduced the ex-
pected return from insurrection.
V. Equilibrium
Although the full implications of the
Kuhn-Tucker conditions cannot be derived
analytically, one can readily see some inter-
esting relations among the endogenous vari-
ables. By replacing 1, s, and i in equation
(2) with L, S, and I, the average peasant
family's expected income, denoted by E, is
918 THE AMERICAN ECONOMIC REVIEW SEPTEMBER 1991

TABLE 1-SIMULATED EQUILIBRIA

Empirical
Or 0 L I S x /3 M/A E/A E/(M + E) relevancea

0.01 0 0.997 0 0.003 0.487 0 0.484 0.513 0.515

0.50 0 0.856 0 0.140 0.303 0 0.163 0.693 0.810
0.99 0 0.766 0 0.234 0.237 0 0.003 0.763 0.997

0.01 0.1 0.941 0.056 0.0033 0.448 0.073 0.389 0.552 0.587 >'
0.50 0.1 0.780 0.114 0.107 0.326 0.302 0.105 0.675 0.865
0.99 0.1 0.1229 0.838 0.039 0.877 0.955 0.0001 0.1228 0.999 **

0.01 0.5 0.744 0.254 0.0025 0.495 0.349 0.239 0.505 0.679
0.50 0.5 0.524 0.407 0.070 0.523 0.707 0.047 0.477 0.910 *
0.99 0.5 0.0335 0.952 0.015 0.967 0.985 0.0000 0.0335 0.999 **

0.01 0.9 0.607 0.391 0.0021 0.567 0.492 0.174 0.433 0.173
0.50 0.9 0.393 0.550 0.057 0.637 0.798 0.030 0.363 0.924 *
0.99 0.9 0.0204 0.970 0.010 0.980 0.990 0.0000 0.0204 0.999 **

aSee text for explanation of symbols.

calculated to be [With I = 0 and, hence, /3= 0, the peasants'

realized share of income would equal (1 -
(10) E= (1-x)AL x)/L with probability one.]
The main objective of the analysis, how-
+(1- 3)wS+ 3xAL. ever, is to focus on the parameters of the
technology of insurrection, 0 and a, and to
Then, combining equation (10) with equa- determine how the ruler's policy choices
tions (7) and (8), one finds that in equilib- and the resulting equilibrium allocation of
rium E and x are inversely related. Specif- resources and probabilistic distribution of
ically, for either I = 0 or I > 0, income depend on these parameters. For
this purpose, I have calculated simulated
(11) E= (1-x)A. solutions to the problem of maximizing M
for selected values of 0 and a. Table 1
[Because I = 0 would imply ,8 = 0, with I = 0 reports an illustrative sample of these simu-
each peasant family's realized income would lated solutions. (A fuller set of simulation
equal (1- x)A with probability one.] results is available from the author.) In in-
Adding E, as given by equation (10), to terpreting these results it is useful to keep
M, the expected income of the ruler's clien- in mind that the Pareto optimal allocation
tele, as given by equation (1), confirms that of resources for this economy-that is, the
total income, measured per peasant family, allocation that maximizes total production
is -is (L, I, S) = (1,0, 0).
The top block in the table shows solutions
E+M=AL. for 0 = 0. In this case, Kuhn-Tucker condi-
(12)
tion (6c) is relevant. It is optimal, as well as
feasible, for the ruler to choose a combina-
Dividing equation (11) by equation (12) tion of policies that includes a large enough
shows the peasants' expected share of total amount of soldiering time and a low enough,
income to be but positive, tax rate to induce the peasants
to devote no time to insurrection. More-
over, with I equal to zero, /8 equals zero.
E 1-x Even though in this case insurrection is
(13) E+M L completely deterred, both the possibility of

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VOL. 81 NO. 4 GROSSMAN: GENERAL EQUILIBRIUM MODEL OF INSURRECTIONS
insurrection and the technology of insurrec-
tion influence the allocation of time be-
tween production and soldiering and the
distribution of income. Specifically, the
smaller is oa, the smaller is the value of S
associated with a given value of S -that
is, the more effective is soldiering time in
deterring insurrection. Consequently, the
chosen value of x is negatively related to c,
and the chosen value of S is positively re-
lated to a.
With I equal to zero, because S is posi-
tively related to a, L is negatively related to
a. Moreover, the simulations show that, in
the limit as a- approaches zero, S ap-
proaches zero, and hence, with I equal to
zero, L approaches unity. In other words,
an equilibrium allocation that is Pareto op-
timal occurs in this economy only as a limit-
ing case that is approached as soldiering
time becomes extremely effective in deter-
ring insurrection, and consequently, the
amount of soldiering time needed to deter
insurrection completely approaches zero.
The table reports equilibrium values of
M and E normalized by A-that is, as ra-
tios of potential total production, which is
the value of M + E associated with L = 1.
Because x is negatively related to a, E/A
is positively related to a-. Thus, as the table
confirms, with 0 = 0 it must be that the
peasants' share of income, E/(M + E), is
not only positively related to a, but in-
creases with a even faster than L de-
creases. In fact, as af approaches unity,
E/(M + E) also approaches unity. The im-
portant result is that the less effective is
soldiering time in deterring insurrection the
smaller is total income but the larger is the
income of the peasants.
Because for a smaller a the peasants
receive a much smaller share of a larger
total income, the income of the ruler's
clientele, M/A, is negatively related to a
and, hence, positively related to L. Thus, as
the equilibrium allocation approaches
Pareto optimality, the income distribu-
tion becomes both absolutely and relatively
more favorable to the ruler's clientele. The
table shows that, as a approaches zero,
E/(E + M), M/(M + E), and M/A all ap-
proach one-half.
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919
The lower three blocks of the table show
solutions for 0 > 0. With 0 > 0 Kuhn-
Tucker condition (6a) is relevant. Because
all positive tax rates are associated with
positive values of I, the ruler chooses a
combination of policies, which again in-
cludes a positive amount of soldiering time
and a positive tax rate, that results in an
equilibrium in which peasants also allocate
positive amounts of time to insurrection as
well as to production. As a result, with 0 > 0
the equilibrium value of 3 is positive, and
the distribution of income is probabilistic.
As noted above, equations (4) and (5)
imply that, for given positive values of x, L,
I, and S, both /8 and the expected return to
time allocated to insurrection, fir/I, are
larger the larger is 0 and the larger is o-.
Consequently, for given choices of x and S,
with 0 > 0 the larger is either 0 or a- the
larger must be I, and hence the smaller
must be L in order to equate the expected
return to insurrection to the expected re-
turns to production and soldiering. As the
table confirms, the first-order effect of ei-
ther larger 0 or larger a- would be that
peasant families allocate more time to in-
surrection and less time to production. The
larger value of I also would add to the
direct effects of both larger 6 and larger o-
in increasing /. Moreover, the negative re-
lation between L and both 0 and a, rein-
forced by the positive relation between /8
and both 6 and a, means that the expected
income of the ruler's clientele, M/A, is
negatively related to both 6 and a.
One sees from the table that, for some
combinations of 6 and a, both being be-
tween zero and unity, the equilibrium prob-
ability of a successful insurrection would be
so large as to be inconsistent with a viable
political structure. For example, with 0 pos-
itive and oa close to unity, as in the rows in
the table that are marked with two aster-
isks, the peasants in equilibrium would allo-
cate most of their time to insurrection. As a
result, the probability of a successful insur-
rection would be close to unity, and the
ruler's policies would be able to achieve for
his clientele, at most, a negligible expected
income. The rows marked with a single as-
terisk, in which the sum of 0 and a is
920 THE AMERICAN ECONOMICREVIEW SEPTEMBER 1991

relativelylarge although oa is not close to production against both the effect of a

unity, are also problematicwith regard to highertax rate in decreasingthe fractionof
political viability,because they also would time that peasantsdevote to productionand
involvelarge equilibriumvalues of ,3. Thus, the effect of a higher tax rate in increasing
with 0 > 0 the cases that might be empiri- the fractionof time that peasants devote to
cally relevantwould seem to be the rows in insurrection.In other words, too high a tax
the table that are markedwith a check. In rate would be bad for the ruler both be-
these rows, the sum of 0 and cr is relatively cause it would depress the tax base, as in
small, and the equilibriumprobabilityof a the analysis of the Laffer curve, and be-
successful insurrection does not exceed cause it would increase the probabilityof a
one-half. successfulinsurrection.In a generalequilib-
As also noted above, the elasticity of ,B rium framework,the solution to the ruler's
with respect to I equals (1- 0)(1 - 3). Con- problemimplies an allocationof labor time
sequently,the largeris 0 the smalleris the among production,soldiering,and insurrec-
effect of incrementsin I on /3 and the less tion, an expected distributionof income be-
is the ruler concerned at the margin with tween the ruler's clientele and the peasant
deterring insurrection.Accordingly,as the families, and a probabilityof successful in-
table confirms,for a larger0 the rulerwould surrectionthat all depend on the technology
choose a smaller S and a higher x. These of insurrectionand its suppression.
policy responses would reinforce the posi- One relevantpossibilityis that in equilib-
tive effect of 0 on I and 8. Moreover, riumno time is actuallydevotedto insurrec-
because x is positivelyrelated to 0, E/A is tion. Even in this case, however,the threat
negativelyrelated to 0. In sum, as the table of insurrectioninfluencesthe policies of the
confirms, with 0> 0 the larger is 0 the ruler and the resulting allocation of time
smaller is total income, the expected in- and distributionof income. Specifically,if
come of the ruler's clientele, and the ex- the technologyof insurrectionis such that
pected income of the peasants. the expected return to participationin an
The table also shows that with 0 > 0, in insurrectionremainsfinite even if zero time
the cases that mightbe empiricallyrelevant, is allocated to insurrection,then the ruler
for a larger value of cr the ruler again demandsa large enough amountof soldier-
would choose a larger S and a lower x. In ing time and sets a low enough positive tax
these cases, because a- and x are negatively rate to deter insurrection completely.
related, a- and E/A again are positively However, a Pareto optimal allocation, in
related. Thus, although total income and which all availabletime is devoted to pro-
the expected income of the peasantswould duction and no resources are wasted on
change in the same directionin response to either soldiering or insurrection, occurs
a change in 0, with 0> 0, as with 0 = 0, only as a limiting case that is approached
total income and the expected income of as soldieringtime becomes extremelyeffec-
the peasants would change in opposite di- tive in deterringinsurrection.Moreover,the
rectionsin response to a change in o. less effective is soldieringtime in deterring
insurrection, the larger is the amount of
VI. Summary and Conclusions soldiering time and the lower is the tax
ratee that the ruler chooses. Thus, in equi-
The probability of a successful insurrec- libria with low productionand low income
tion depends on the fractions of time that for the ruler'sclientele, the peasantsnever-
peasants devote to insurrectionand to sol- theless enjoy high income.
diering.Therefore,the ruler'smaximization More generally,the ruler'spolicy choices
of the expected income of his clientele in- do not deter insurrectioncompletely,and in
volves a positivedemandfor soldieringtime equilibriumthe fractionof time devoted to
and the choice of a tax rate that trades off insurrectionand the probabilityof a suc-
the effect of a higher tax rate in increasing cessful insurrectionare positive. Moreover,
the ruler's revenue from any given level of the more conduciveis the technologyfor a

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VOL. 81 NO. 4 GROSSMAN: GENERAL EQUILIBRIUM MODEL OF INSURRECTIONS
successful insurrection, the larger are the
fraction of time devoted to insurrection and
the probability of a successful insurrection,
and the smaller are total production and
the expected income of the ruler's clientele.
Thus, equilibria with low political stability
also suffer from low production and low
expected income for the ruler's clientele.
If a technology more conducive to a suc-
cessful insurrection reflects soldiering time
being less effective in deterring insurrection,
then the ruler again would set a lower tax
rate, which would imply higher expected
income for the peasants. In this case, al-
though lower production would be associ-
ated with lower political stability, lower pro-
duction again would be associated with
higher expected income for the peasants.
Conversely, the peasants are not better off
with higher political stability and higher
production unless the technology of insur-
rection also induces the ruler to set a lower
tax rate.
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