Ordered Anarchy, State and Rent-Seeking: The Icelandic Commonwealth 930-1264

My task is to come up with a theory of cooperation and, then, apply that theory to a particular historical case. The historical case I discuss Is the rise and decline of social order in medieval Iceland; the so-called Commonwealth period. The Commonwealth experience poses two main questions; first, how did the Commonwealth emerge, and, second, why did it break down. I begin by discussing the concepts of reciprocity and cooperation, and then offer an evolutionary theory of cooperation. Next, I put the theory to the test of actually explaining the rise of the Commonwealth’s institutional structure. I find that the theory is highly informative in application and able to account for Iceland’s institutional structure. Reciprocal behavior on the part of the Icelander’s initiated and created the cooperative institutional system. The keys to the stability of the system are found in the encouragement of reciprocical behavior, where the future repeated engagements are important enough to discourage defections. The Commonwealth was a decentralized structure, based mostly on voluntary cooperation, and enforcements of judgements were private. Along with expanding population, the Commonwealth chieftains position as arbitrators and owners of churches strengthened their position with respect to their followers. As time went by they realized the advantage of their privileged status and combined the sale of legal and religious services for their own benefit. By the last decade of the eleventh century the chieftains were able to use their position to introduce the tithe, obligating farmers to pay a tax to the chieftains and the Church, of one percentile of their wealth. In essence, rent-seeking (defection) became more profitable for the chieftains than long-term reciprocial behavior. Reciprocity , fruitful in establishing Iceland’s institutional structure, lost its importance and such behavior diminished. The tied sales of legal and religious services established the chieftains as local monopolies, as minimal states. These minimal states now competed for more territory, and population, and, most importantly, more chieftaincies and churches. The minimal states became fewer and fewer as the surviving ones triumphed in their advancements. Through the struggle for wealth and power the chieftains mostly killed each other and by 1250 only few chiefdoms and even fewer chieftains survived. By that time the king of Norway had established a foothold in the country and by the voluntary choice of the Icelandic farmers in 1262-64, was accepted as king of Iceland