I once wrote:
Some time ago, [Mancur] Olson started work on the fruitful distinction between a stationary and a roving bandit. A stationary bandit has some incentive to invest in improvements, because he will reap some return from those improvements. A roving bandit will confiscate wealth with little regard for the future. Olson then used this distinction to help explain the evolution of dictatorship in the twentieth century, and going back some bit in time, the rise of Western capitalism.
I have never found this approach fully convincing. Is the stationary bandit really so much better than the roving bandit? Much of Olson’s argument assumes that the stationary bandit is akin to a profit-maximizer. In reality, stationary bandits, such as Stalin and Mao, may have been maximizing personal power or perhaps something even more idiosyncratic. Second, the stationary bandit might be keener to keep control over the population, given how much is at stake. He may oppose liberalization more vehemently, for fear that a wealthier and freer society will overthrow him.
Here is more. I had forgotten I had written that review, so I must thank Arnold Kling for the pointer.
Methinks capital, especially financial capital, is much like a roving bandit these days…
reason magazine had a piece recently that I think will help to shed light. The example given was Paul Biya, president of Cameroon. He’s been in power since 1982, but still Cameroon is among the poorest countries in the world. If the stationary bandit theory worked, it should be that Biya would have made some investments to improve the infrastructure, etc., in order to maximize his profits.
Here’s where it gets tricky–for many dictators, there is no way of knowing how “stationary” they actually are. If Biya were a perfectly rational actor, and if he knew that he would be in power for 20+ years, then of course he would put money into roads and schools, because then the economy would be strong enough to keep him rich for as long as he’s in power. If, on the other hand, he thought he’d only stay in power for 10 years, then there is no reason to make road improvements, etc., because the existing roads will work well enough for the time he’s in power. Because the dictator has imperfect knowledge regarding how stationary he is, he may act more like a roving bandit.
The piece is Tim Harford, “Why Poor Countries are Poor,” reason magazine (March 2006) pp. 32-39.
Although Dictators obviously like to be wealthy they also like to remain
power. I am willing to bet that many Dictators see the benefits from
public infrastructure investment weighed against the risks to their
regime from opening up. Perhaps an even more apt example is North
Korea. The thugs in Pyongyang have, time after time, shown a preference
for centralized power over development. Even Alex might develop a taste
for concentrated authority were he a dictator. (not that that is a bad
thing Mr. Tabarrok sir,…)
This discussion does not seem to be entirely fair to Olson’s conception. Olson was working towards incorporating force into economic analysis. His distinction between a roving bandit and a stationary bandit was not between good government and bad government but between no government and some government. In was a question about the incentives to provide quite basic public goods. So, to take the above examples, are folk in Cameroon and places like it typically better off than folk in Somalia and places like that?
He also pointed out that Stalin had developed an optimal structure for extraction of surplus in the interests of the ruler. This somewhat changed the downsides of a ‘stationary bandit’.
Taking the concept of a stationary bandit having different incentives further, Olson argued that the longer the time horizons of the ruler, the more the interests of the ruler approached those of the ruled, so, of the forms of government where the ruled had no choice of ruler, hereditary rulers were a better prospect. A position which even the modern world gives some support for.
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In Africa,almost all leaders form part of the stationary badicts 1st the way they grasp power-through ridging and manupulation of election results intimidating voters and even frustrating the major opposition leaders.2nd After grasping power ,they form private bussiness empires closely monitored by trusted family members who in most cases subscribe to their idiology(capitalistic mindset).At the end of the day,the village peasants reap peanuts unsatisfactory.
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I personally prefer the roving bandit compared to teh stationary bandit.
Wow, this really makes one think. Thanks for this discussion!
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