Evolutionary Dynamics of Class Structures

We study the emergence and persistence of institutions governing the size of the joint surplus and its distribution between two classes, and we identify conditions under which efficient and/or egalitarian contractual conventions are likely to emerge and to persist. We study transitions between contractual conventions as a perturbed Markov process in which individuals occasionally play idiosyncratically rather than adopting a best response. In contrast to the standard stochastic evolutionary models, we repre-sent idiosyncratic play as intentional rather than uncoordinated individual behavioral errors. In contract to the results of the models with unintentional idiosyncratic play, when class sizes differ, very unequal contracts may be stochastically stable even if they are very inefficient and not risk-dominant. We extend this benchmark model to make the relative sizes of the two classes endogenous, showing that higher barriers to inter-class upward mobility make unequal contracts stochastically stable, and imply higher levels of societal class inequality. We also let the rate of idiosyncratic play vary with the degree of class polarization and group network structure. Finally, we introduce the state as an actor mediating class conflict, and identify the conditions under which it will adopt redistributive strategies. In the penultimate section we suggest extensions addressing the effects of technical change, collective as opposed to individual idiosyn-cratic play, endogenous barriers to class mobility, variations in state capacities, and the structure of inheritance systems and marital assortment