The Evolution of Government: From Protection Fees to Social Contract

In the previous lecture, we mentioned that resolving large-scale “externality” issues ultimately requires coercive force, and the organization that wields this force is the government. Our deductive logic is clear. But is this truly how governments originated?

Was it a group of scholars, deeply versed in logic, who after long debates eventually realized the limitations of self-governance, then sat down for a meeting, reached a consensus in a peaceful atmosphere, and decided to establish a government, thereby bringing government into existence?

Not at all. Governments are not the invention of scholars. The historical truth is closer to… governments originating from bandits.

The history of government is the history of transforming protection fees into taxes, rulers into agents, and subjects into citizens.

From Roving Bandits to Stationary Bandits: The Origin of Government #

From the day humans learned to accumulate wealth, some discovered that robbery was a faster way to get rich than labor. However, if you over-rob, you’ll soon realize this isn’t a sustainable long-term path to prosperity.

Villagers painstakingly produce a small amount of grain, and you arrive to plunder everything, not even leaving seeds. The villagers can only starve, and the next year, you’ll have nothing left to steal. As American economist Mancur Olson mentioned in our previous lecture [1], this method of robbery is too primitive; you are a “roving bandit,” or more elegantly, a “nomadic marauder.”

Olson’s insight is that roving bandits will eventually evolve into “stationary bandits”—that is, “settled marauders”: they will simply occupy a village, leave the inhabitants a way to live, allow them to continue farming, and annually take only 30% of their income. Being a bandit doesn’t have to be all about killing and fighting; isn’t a steady stream of income better?

Once you adopt a long-term perspective, you undergo a conceptual leap: you are no longer a “marauder” but a ruler. You will regard these villagers as your subjects and provide them with protection services, ensuring that other roving bandits do not come to plunder. This becomes your exclusive economic zone.

Olson believes this is the origin of government.

We don’t even need to look back to ancient times; such phenomena still occur today. Whether it’s Hezbollah in Lebanon, the Sicilian Mafia in Italy, or drug cartels in certain regions of northern Mexico, they all engage in robbery and murder while providing basic order services to the local populace.

They not only maintain public order but also handle judgments and even build schools. They even need to make appearances at family celebrations and funerals.

Please note, this is not to say that stationary bandits become good people. They merely change their time preferences. Once bandits adopt a long-term perspective, they begin to act like rulers; and once rulers forget their constraints, they can always revert to being bandits.

The Birth of Leviathan: Constructing the State Apparatus #

So, what if we don’t want bandits? Wouldn’t it be better for us, a group of villagers, to live happily together? In theory, yes. In our “Elite Daily Lessons” column, we once introduced the work of anthropologist David Graeber and archaeologist David Wengrow, The Dawn of Everything [2]. Recent research in this book suggests that many early societies possessed complex capabilities for self-governance, and were even more free than later state societies. However, these early peoples had not entered the stage of large-scale agriculture, possessed little private property, and, to put it plainly, did not have much wealth worth plundering.

Once wealth worth plundering appears, human society is bound to be filled with conflict. Without a ruler, it would descend into the “war of all against all” state described by British philosopher Thomas Hobbes in Leviathan.

In such a state, people would yearn for a Leviathan to emerge and preside over everything, entering into a contract: we only need to pay him protection fees. In this way, the evolution from roving bandits to stationary bandits is bound to occur—

Revenge will evolve into courts, gangs will transform into police, protection fees will become taxes, private coercion will evolve into public coercion… Ultimately, there will always be a stationary bandit force powerful enough to awe all quarters, much like Zhang Zuolin’s transformation from “Captain of the Zhaojiamiao Security Detachment” to “Commander-in-Chief of Security for the Three Eastern Provinces,” establishing a long-lasting and effective rule—this is the State.

German sociologist Max Weber’s definition goes straight to the core: the State is a human community that successfully claims the “monopoly of legitimate physical violence” within a given territory [3].

And government is the executive arm of the state apparatus.

So the origin of government lies with stationary bandits collecting protection fees. The foundation of government is violence, it is the ultimate coercive power.

A company can fire you, but not imprison you.

A platform can charge fees, but not levy taxes.

A school can impart knowledge, but not prescribe which doctrine is orthodox.

A church can excommunicate, but not execute heretics—at least, not in modern society.

The fundamental difference between government and all these other organizations is not that it provides better services, nor that it is more benevolent, nor even that it is more “for the people”—but that it possesses ultimate coercive power.

Only by understanding the evolutionary logic from roving bandits to stationary bandits and the Leviathan can one truly grasp the meaning of “the people need government, and government also needs the people.”

War and Grain: The Fuel for State Formation #

In fact, if it were merely about sustaining a ruler to provide basic security services, the populace wouldn’t need to pay too much. If one household paid 10% in protection fees, a hundred households could support a stationary bandit living at ten times the standard of an ordinary person. Collecting rent steadily, what more could one be dissatisfied with?

Indeed, early tribes and clan alliances lacked stable state apparatuses, and the burden on the populace was very low; strictly speaking, they couldn’t even be called states.

States, in fact, are created by war.

Once war erupts among stationary bandits, rulers are forced to establish regular armies; establishing armies requires collecting more taxes, and collecting more taxes necessitates supporting a bureaucracy. Whichever bandit group excels in these three aspects will win. The losers are annexed, and the victors become increasingly powerful.

Taking China’s Spring and Autumn period as an example, states still adhered to etiquette and law in warfare, with only nobles taking to the field; battles were ritualistic, and killing was extremely limited. However, by the Warring States period, states had to continuously strengthen their state apparatus for war, through what was known as legal reforms. Qin, having evolved over five centuries of an arms race, could be described as a state apparatus armed to the teeth: the commandery-county system, a bureaucratic system, household registration, unified taxation… By this point, the burden on the populace had become extremely heavy.

As American sociologist Charles Tilly said, this is “war making and state making.” The title of his 1985 paper was “War Making and State Making as Organized Crime” [4].

In fact, calling it crime isn’t entirely fair. If you don’t initiate war, you can only wait to be attacked. The only solution is the emergence of a unified empire, acting as the sole Leviathan.

However, a unified empire is not easily obtained; it also requires a crucial fuel—grain.

This is the insight of Yale anthropologist James C. Scott [5]: Grain is a particularly ideal subject for taxation.

Grains like wheat, barley, and rice all grow in the ground, allowing the government to easily estimate your land’s area and approximate yield at a glance. Grains have fixed harvest seasons, so tax officials know exactly when to come for collection. Grains are highly quantifiable; a few dou are a few dou (斗 is a traditional Chinese unit of volume for grain, roughly 10 liters). Grains are also easy to store and withstand transportation. More importantly, farmers who plant grains are tied to the land, with nowhere to escape.

This makes management incredibly convenient. In contrast, nomadic peoples are here today and elsewhere tomorrow; you’d have no idea where to find them if you wanted to levy taxes or conscript labor.

Grain truly is a ruler’s magic weapon.

Researchers using computer simulations of “cliodynamics” [6] have found that in any agricultural core region suitable for low-cost taxation to support armies, war becomes cheap and common: no matter how many small states initially divide the land, ultimately one large state is bound to unify it—wars of unification are affordable.

This is why ancient China, Mesopotamia, India, and Egypt—all agricultural core regions—moved towards unified empires.

In contrast, why was Europe so difficult to unify? Many attribute this to geographical factors, believing that Europe’s fragmentation by mountains and seas made it unsuitable for troop deployment and warfare. However, a more fundamental reason is likely that Europe lacked a single agricultural core region like the North China Plain. Europeans had multiple sources of wealth beyond grain, including animal husbandry, grapes, olives, and urban trade, making taxation very difficult for governments, and wars of unification too costly for them.

When Western missionaries first arrived in China, they were often struck by a sense of cultural shock, astonished that China was such a unified and prosperous nation. Matteo Ricci once marvelled that almost all items produced in Europe could be found within this single country of China [7].

Indeed, from the Qin Dynasty onward, China was no longer an “early state” or “ancient kingdom,” but a true state with a complete bureaucratic system, tax system, army, and various institutions.

However, this kind of state is still different from a modern state; it can only be called a “pre-modern state.”

The Pre-Modern State: Patrimonialism and Huang Zongxi’s Law #

The biggest characteristic of a pre-modern state is that it views the populace as a resource to be extracted. The government is not a public service company, but the ruler’s private property.

Emperors even disdained to utter platitudes like “I serve the people.” The Book of Lord Shang directly advocated “weakening the people”: “If the people are weak, the state is strong; if the state is strong, the people are weak. A state with the Way prioritizes weakening the people.” Han Feizi more bluntly stated: “For the ruler, when there is trouble, he uses their lives; when there is peace, he exhausts their strength.” Later expressions might be slightly more subtle, but they still did not hide their essence: whether it was “L’état, c’est moi,” “parents of the people,” “eat the ruler’s stipend, serve the ruler’s affairs,” or “boundless imperial grace”… no matter how embellished, this can only be described as a civilized stationary bandit.

The form of pre-modern government is “patrimonialism.” The good relationship one could hope for with the government was one of dependence: “I pledge allegiance to you, and you protect me”; safety and opportunities were not provided by institutional equality but distributed privately by the powerful elite [8].

One can imagine that in such states, the lives of the common people were arduous… but don’t think being an emperor was easy either. According to historical writer Zhang Hongjie’s statistics [9], among all 611 emperors in Chinese history, only 339 died of illness and old age, while 272 died by suicide or murder, resulting in an abnormal death rate as high as 44%, with an average lifespan of only 39.2 years. Is there a more dangerous profession in the world?

The key lies in the fact that patrimonialism places immense power, unbound by any external constraints, into the hands of an ordinary human being, a situation that is inherently extremely dangerous. The greater the power, the more everyone desires to approach it, manipulate it, and replace it, making the emperor less secure and more suspicious; the more suspicious, the more reliant on personal loyalty; the more reliant on personal loyalty, the worse the system becomes. This is a vicious cycle.

Even more terrifying than patrimonialism is another vicious cycle, summarized by Mr. Qin Hui as “Huang Zongxi’s Law,” which originated from the Ming-Qing thinker Huang Zongxi’s observations on historical taxation [10]. The process is roughly as follows—

At the beginning of a dynasty, rulers learn from the lessons of the previous one, intending to allow the populace to recover and recuperate, thus announcing light levies and reduced taxes.

However, the bureaucratic class has an instinct for self-expansion, and emperors have an urge for grand achievements. After all, the money spent isn’t their own; who wouldn’t want to recruit a few relatives to accomplish great things together? Consequently, various expenditures rise, the cost of governance increases daily, and finances become strained. Then, taxes can only be increased—but since official taxes are difficult to raise nominally, officials at all levels invent various new charges such as surcharges, temporary levies, silver meltage fees (often a hidden tax on silver currency), and corvée commutation to silver, making the burden on the people increasingly heavy.

At a certain point, a reformer like Zhang Juzheng would emerge in the imperial court, pointing out that such indiscriminate charging was unacceptable, tantamount to condoning corruption, and something the people could not bear. Consequently, miscellaneous taxes would be merged into the official taxes, and it would be announced that no more arbitrary collections would occur.

Yet, within a few years, finances would again fall short, compelling the invention of new miscellaneous taxes.

This cycle repeats: each reform claims to reduce burdens, but in the long run, it solidifies these burdens, creating a “cumulative and irreversible harm.” Eventually, farmers discover that the taxes owed on their cultivated land exceed its output, and they begin to flee. This leads to an increase in displaced people → popular uprisings → dynastic collapse → reconstruction of a new dynasty → and the cycle repeats.

Of course, there was no shortage of good emperors and many upright officials in Chinese history. But this is not about enlightened rulers or incorruptible officials: under two millennia of the Qin system, as long as patrimonialism and the extraction mechanism remained unchanged, and the people had no legitimate means to check the government’s power and tax expansion, successive dynasties could only repeat this cycle.

The Evolution of the Modern State: The Dawn of Constitutionalism #

Given the many ills of the pre-modern state, did rulers themselves become aware of structural problems, then discuss them with scholars, and design better institutions to bring about the modern state?

Not at all. One must not overestimate the influence of thinkers on stationary bandits. The evolution from pre-modern states to modern states primarily involves three key junctures—

The first juncture is the Magna Carta in England in 1215, which for the first time recognized that “the king is under the law.” But this did not stem from the king’s benevolence.

In 1215, King John of England repeatedly lost foreign wars, forcing him to drastically increase taxes on domestic nobles, conscript soldiers, and even confiscate property. The nobles, pushed to their limit, united and seized control of London by force. It was under duress that King John signed the Magna Carta.

The most intriguing part of the Magna Carta is Article 61: nobles could elect 25 men to oversee the king’s adherence to the agreement; if the king failed to rectify violations, the nobles could seize castles, lands, and property to enforce compliance.

This was equivalent to institutionalizing “rebellion” as a right—this was the beginning of constitutionalism. In hindsight, the right to legitimate rebellion not only safeguarded the nobles’ interests but also benefited the king, providing a sense of security for all parties. However, this was not the result of philosophical impetus but an institution forced into existence by the balance of power.

The second juncture is the Glorious Revolution of 1688. Its cause was also not an ideological revolution, but rather the British upper elite banding together to depose an unconstrained king in order to preserve their own power, property, and religious status. The result was the Bill of Rights, which explicitly codified several key limitations—the king could not suspend laws, levy taxes, or maintain a standing army in peacetime without Parliament’s consent.

Once a monarch was stripped of these three powers, they ceased to be the master of a patrimonial system and began to transform into a role within an institution.

We can see that it took a full 473 years from the signing of the Magna Carta until Parliament was genuinely able to limit the king. This was the result of continuous struggle over several generations. During this period, two thinkers may have played a role, but their influence was not significantly large.

One was the 17th-century jurist Edward Coke, who reinterpreted the Magna Carta from a medieval feudal document into the foundation of inherent English liberties. This effectively re-framed an ancient noble rebellion as “the king of England has always been subject to common law,” further inferring that “subjects possess ancient rights, and taxation and detention must be constrained by law” [11].

The other was the philosopher John Locke. His work, Two Treatises of Government, opposed the divine right of kings, arguing that the purpose of government was not to uphold monarchical glory but to protect people’s lives, liberty, and property; government power derived from the consent of the people, essentially a fiduciary power; if the government violated this trust, the people had the right to alter or even overthrow it [12]. Locke wrote this book before the Glorious Revolution, but it was published only after it.

Looking back, Coke and Locke changed the political narrative, which was extremely important because it fundamentally altered people’s perceptions. However, they primarily legitimized historical shifts through narrative rather than directly driving them.

By the time Rousseau published The Social Contract, it was already 1762.

The third juncture in the evolution of the modern state, truly embodying the top-down design of thinkers, was the framing of the U.S. Constitution in 1787.

Americans integrated British tradition, the memory of the Roman Republic, and Montesquieu’s theory of separation of powers into a brand-new system. The technical advancement of this system lay in its resolution of the question of how strong the central government should be. The framers clearly understood that a government too weak could not deal with foreign enemies, debt, trade, or internal order; however, if the government were too strong, how could it be prevented from oppressing the people?

The answer was a dual system of “checks and balances”—horizontal separation of legislative, executive, and judicial powers; and vertical sharing of power between the federal government and the states. The core idea behind this design was Madison’s dictum, “ambition must be made to counteract ambition”: not to expect anyone to be moral, but to expect everyone to have interests, and then to let these interests check one another.

However, the U.S. Constitution is not entirely attributable to thinkers either. While Washington’s refusal to become emperor certainly showed his progressive thinking, it also reflected his limited power: he led a revolutionary army originally cobbled together from state militias and the Continental Army, whose finances relied on the Continental Congress and state provisions, and whose officers and soldiers pledged loyalty not to Washington personally, but to the states, the Congress, and the revolutionary cause…

In short, many countries have constitutions, but many constitutional countries do not have “constitutionalism.” Why is this? Because limiting power is not merely written on paper, but embodied in the actual distribution of power.

The Engineering of Stationary Bandits: Institutionalized Modern Government #

People need government to establish order, yet governments originate from stationary bandits. Modernization, then, means that even if you are a stationary bandit, you must be engineered.

Modern people must learn to shift their focus from “is this person good?” or “is this government good?” to “is our system effective?” Pre-modern governments were the governments of rulers; modern governments are institutionalized governments.

Perhaps because pre-modern traditions are too deeply ingrained, many today believe that intellectuals who question the government are “causing trouble” for the country, are “troublemakers,” or “lack a sense of propriety”… However, if you are a scholar, questioning the government is actually your duty.

It is important to remember that even though modern governments provide numerous positive externalities, they are also the greatest creators of negative externalities. We will elaborate on this in our next lecture.

Notes

[1] Olson, Mancur. “Dictatorship, Democracy, and Development.” American Political Science Review 87, no. 3 (1993): 567–576.

[2] David Graeber and David Wengrow, The Dawn of Everything, 2021. 《人类新史》1：高贵的先民。

[3] Weber, Max. “Politics as a Vocation.” 1919. In From Max Weber: Essays in Sociology, translated and edited by H. H. Gerth and C. Wright Mills. Oxford University Press, 1946.

[4] Tilly, Charles. “War Making and State Making as Organized Crime.” In Bringing the State Back In, edited by Peter B. Evans, Dietrich Rueschemeyer, and Theda Skocpol, 169–191. Cambridge University Press, 1985.

[5] Scott, James C. Against the Grain: A Deep History of the Earliest States. Yale University Press, 2017.

[6] Turchin, Peter, Thomas E. Currie, Edward A. L. Turner, and Sergey Gavrilets. “War, Space, and the Evolution of Old World Complex Societies.” Proceedings of the National Academy of Sciences 110, no. 41 (2013): 16384–16389.

[7] 《利玛窦中国札记》。Matteo Ricci / Nicolas Trigault, China in the Sixteenth Century: The Journals of Matthew Ricci, 1583-1610，Louis J. Gallagher 英译，1953。

[8] 当然中国发明了伟大的科举制度，给人一种强烈的公平感。但在皇上眼中，那只是一个对聪明人维稳、对权贵制衡的手段而已。如果你考察隋唐以来科举选官的面，会发现普通人做官的比例远低于权贵。

[9] 中新网：《张宏杰：中国历史上600多个皇帝近一半死于非命》 https://www.chinanews.com.cn/m/cul/2015/06-07/7327283.shtml

[10] 秦晖，《并税式改革与"黄宗羲定律"》。

[11] Sir Edward Coke, The Second Part of the Institutes of the Laws of England, 1642.

[12] John Locke, Two Treatises of Government, 1689/1690.