The nature of the market: The roads from taking to trading

Abstract

A Hobbesian society is modeled to study how the market emerges from violence. From a Cournot military contest for wealth, primitive markets emerge when Rousseau's Garden of Eden or an arms race is the equilibrium rather than war. Politically-dominated (e.g., socialist) or Smithian markets with a government results from war or an arms race. The study reveals the roads to diverse political-market systems (e.g., the market economy), explains the integrated political and economic nature of the market, and demonstrates the value of viewing violence as an industry. It enlightens issues such as the classic Hobbesian-Rousseau debate, the causes of wealth, and the Coasian bargain.