Business and Government

Sessions 4-5
 Evolution of Governance
• How did the current form of government –
a democratic state evolve?
• State
– Sovereign
– Backed by force
– Territorial

• Democracy
• Collective decision making
• The Rule of Law (independent judiciary)
• Accountable Government (free and fair elections)
 Evolution of Governance – A
Theoretical Analysis
• The question has intrigued a large number
of academics – economists, political
theorists, archaeologists, biologists,
anthropologists etc.

• Early political theorists, such as Thomas

Hobbes and Jean-Jacques Rousseau
theorized about the state of nature
 Thomas Hobbes (1588-1679)
• Hobbes argued that in state of nature
there will be
• Humans seek happiness and always seek more
• In order to acquire happiness, they accumulate
riches, mating rights, reputation and friends
• Riches, mating rights, reputation and friends are
scarce, hence it will lead to competition
• Competition leads to war as it is one of the easiest
ways to acquire these resources
• Constant fear of getting killed or forcibly
subjugated adds to the violence
 Thomas Hobbes
• Hobbes clarifies
– There could be periods of peace in the state
of nature, but violence will be more prevalent
– Humans kill not because they enjoy killing, but
for ultimately for self-defence
– State of nature is a state of war
– In the state of nature, therefore the most
valuable commodity should be peace
– How do you achieve peace?
 Jean-Jacques Rousseau (1712-1778)

• Rousseau, like Hobbes, believed that

humans in the state of nature will have a
desire of self-preservation
• He differs from Hobbes in two points
– Resources are relatively abundant
– Humans have a natural aversion to harming their own
kind
– Humans will avoid each other and happily forage in
the abundant wilderness without any desire for
companionship, glory or reputation
 Jean-Jacques Rousseau (1712-1778)

• Why would then a state evolve from

Rousseau’s state of nature?
• Rousseau’s answer-
– Innovation – tool-making, language,
agriculture, concept of property and collective
action
– These innovations will lead to inequality, scarcity,
competition for resources and hence war
– How do we achieve peace?
 Evolution of Governance – An
Empirical Analysis

• Francis Fukuyama relies on empirical

evidence collected by archaeologists,
biologists, anthropologists and tries to
trace out an evolutionary path, rather than
theorizing that evolution as Hobbes and
Rousseau did
 Francis Fukuyama (1952-)

• Fukuyama takes an empirically grounded view

with evidence collected from works of
archaeologists, biologists, anthropologists etc. to
come up with an answer to our question.
• In brief what does he find?
– Human beings were never solitary, they always lived in groups
– State of nature was characterised by state of war, but it was
collective violence and not individual violence
– Human organizations evolved from bands to tribes and then to
states – organizations progressively became larger and more
complex
– Newer organizations contained characteristics of earlier ones
 Francis Fukuyama (1952-)

• Why did humans stay in groups?

– Individuals of behave altruistically toward kin in
proportion to the number of genes they share
– Parents and children share 50 percent of the genes
and hence will behave more altruistically toward each
other than toward first cousins, who share only 25
percent of the genes
– With distant cousins and genetic strangers humans
cooperate as they are thought to play repeated
prisoner's dilemma games
– However, there is scale problem in collective action
 Band-level Organization
• Genetically-linked and primarily hunter-gathers
• Nomadic
• Egalitarian – no permanent leadership, and no
hierarchy
• Leadership is based on strength, intelligence
and trustworthiness, not hereditary
• Leaders are chosen on the basis of consensus
• Decisions are implemented by persuasion and
not coercion
 Francis Fukuyama (1952-)

• Why did humans stay in groups?

– Random mutations in humans gave them a larger
neocortex, which was essential for development of
language
– Oral and written record-keeping helped develop larger
and more complex social organizations as it played a
crucial role in solving for failures of cooperation in
repeated prisoner’s dilemma games in larger
societies
– More complex social organizations required high
demands on cognition and perception, which made
humans evolve even larger brain sizes
 Tribal Organization
• With the advent of agriculture population densities
increasing drastically, from 1 person per square
kilometre to 60 per square kilometre
• Humans needed a very different form of organization –
tribes
• Characteristics of a tribal organization
– They are based on a principle of common descent
– They form segments of various lineages. Segments
often compete for resources and fight each other;
however, faced with threat from a different tribe,
various segments quickly coalesce to repel the threat
 Tribal Organization
• Characteristics of a tribal organization
– Tribes are hierarchical and have a concept of law,
which are implemented by a mix of persuasion,
rewards, social exclusion and coercion
– Language and religion worshipping dead ancestors
greatly facilitate tribal cohesion
– Property rights in tribes were usually customary
– According to Fukuyama, tribal organizations with their
ancestor-worshipping religious ideologies mutated
into the profession-based caste system and became
more potent than in other societies
 Evolution of Governance
• Why did states emerge?
• State
– Sovereign
– Backed by force
– Territorial
• Agriculture made lives stationary, property rights in
agriculture gradually became territorial, agriculture also
lead to inequalities and hence a competition for
resources
• A competition for resources lead to wars, states provided
peace by way of having a monopoly on violence
 Mancur Olsen
• States enabled economic growth

• A stationary bandit is preferable to a roving

bandit

• Resources, net of taxes, of individuals will

be higher within a state than without it