Political Strength and Economic Efficiency in a Multi-Agent State∗

Dictatorship has been the prevalent system of government for most of human history and is still entrenched in many countries today. For the rulers of such regimes, the question of political survival is particularly tricky. How does a dictator ensure that his delegates do not topple him? What are the economic implications of this power struggle among the elite? And how does a foreign power deal with such regimes, when it cares about the welfare of the population? These are some of the most important questions in economic history, comparative politics and international relations, and yet they have received little attention from game theorists. We attempt to address such questions with the help of a formal model, and outline here the results of our study (Debs 2007a). As a starting point, we focus on one particular mechanism that dictators have used to discipline their delegates, the ‘big shuffle’, whereby delegates are rotated from one function to another, and promoted and demoted at will. It was used in a variety of cases throughout history.1 In Mughal India, nobles were in charge of tax collection in a particular region, called jagir, for only a short amount of time. In the Ottoman empire, cavalrymen would ∗I would like to thank Daron Acemoglu and Jim Snyder for excellent advice and encouragement throughout my graduate studies, as well as Abhijit Banerjee and James A. Robinson for helpful suggestions on this project. I would also like to thank George-Marios Angeletos, Nicholas Argyres