July 9, 2010

Efficient Plunder

  • Peter Leeson

    Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
  • Alexander Nowrasteh

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Self-interest  seeking leads stronger individuals to plunder weaker ones. But could it also lead  them to do so in ways that minimize plunder’s social inefficiency? This paper argues that  when contracts between enemies are enforceable and transaction costs are low,  plunderers and their victims benefit from trade that facilitates the former’s  ability to plunder the latter. Coasean “plunder contracts” transform plunder’s  social costs—resources invested in violent appropriation and resources lost in  violent conflict over ownership—into private benefits for plunderers and their  victims. A significant portion of the wealth that plunder would otherwise  destroy is preserved instead. We call this result “efficient  plunder.”