The paradox of power revisited: internal and external conflict

• Published in: Economic theory Vol. 68; no. 2; pp. 421 - 460
• Main Authors: Cruz, Ivan Lopez, Torrens, Gustavo
• Format: Journal Article
• Language: English
• Published: Berlin/Heidelberg Springer 01.09.2019; Springer Berlin Heidelberg; Springer Nature B.V
• Subjects: Advantages; Analysis; Conflict; Economic theory; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Game Theory; Income distribution; Microeconomics; Power; Productivity; Public Finance; Research Article; Social and Behav. Sciences; Weapons; France; United Kingdom; Germany; D74; F50; Internal and external conflict; Paradox of power
• ISSN: 0938-2259; 1432-0479
• DOI: 10.1007/s00199-018-1130-z

This paper develops a two-level model of internal and external conflict in which the paradox of power holds for internal conflict, but not for external conflict. In the model, internal conflict is imbedded in a situation of external conflict. Agents in a group fight over the distribution of resources within the group, but they cooperate to fight against other groups. Agents with low economic productivity have an advantage in the internal conflict game because they face a lower opportunity cost for investments in weapons. However, it is easier for more productive groups to mobilize resources for external conflict, and as a result they have an advantage over less productive groups. The model helps to explain why economically unproductive individuals may enjoy high living standards relative to more productive ones, but more developed groups usually defeat and conquer less developed ones. An extension of the model shows that groups with more unequal distribution of productivity might have an advantage in external conflict. The model can also be extended to study the effects of trade on the intensity of the paradox of power and income distribution within and across groups.