Social contracts, nation-building, and war

Social contract theory suggests that people have willingly given up some of their freedoms to the State and in exchange, the State agrees to protect their remaining rights. One conception of this is that we give up the freedom to retain all of our income (i.e. we grant the State the right to tax us), and in exchange the State protects our life, liberty and property. We submit to this because the State can provide for our collective needs things that could not be provided by each of us individually or through exchange with others. In other words, public goods.

So, I found this NBER Working Paper from last year (ungated version here) by Alberto Alesina (Harvard), Bryony Reich (Northwestern) and Alessandro Riboni (Ecole Polytechnique) really interesting. The paper is very theoretical and maths-heavy. However, it was of interest to me nonetheless because it explains the process of nation-building that occurred progressively as nation states and their armies increased in size, and why the nation states moved increasingly towards providing public goods. The authors write:

Mass warfare favored the transformation from the ancient regimes (based purely on rent extraction) to modern nation states in two ways. First, the state became a provider of mass public goods in order to buy the support of the population. Second, the state developed policies geared towards increasing national identity and nationalism...

The citizens face punishment from illegally avoiding conscription and the soldiers from defecting or cowardice; however it is hard to imagine that wars can be won by soldiers who are fighting only to avoid punishment and citizens who are uncooperative. So, when war became a mass enterprise, the elites had to reduce their rents and spend on public goods which were useful to the populations.

Providing public goods was one way for the elites to ensure that citizens would cooperate with conscription. Where does nation-building come in? The authors explain that:

Besides promising monetary payoffs, the elites have two means to increase war effort. One is to provide public goods and services in the home country so that soldiers would lose a lot if the war is lost. This would lead to investment in "peaceful" public goods and contribute to state building from a different angle relative to the need to collect taxes to buy guns. Second, the elite may need to homogenize or indoctrinate the citizens to make them appreciate victory and dislike living under foreign occupation.

Engaging in nation-building instilled in the citizens a sense of nationhood and a dislike for other nations, thereby increasing war effort. Alesina et al. conclude with:

A key implication of our analysis is that as warfare technologies led to a military revolution with larger armies, the elite had to change the way it motivated the soldiers: from the loots of wars for relatively small armies of mercenaries to public goods and nation building and/or nationalism for large conscripted armies.

Like the paper I discussed on Monday about queens, it made me wonder if there are business implications that can be drawn from this paper. Can CEOs induce more effort from their workers by providing them with public goods and instilling in them a dislike for the competitors? Is this already what tech firms are doing when they install ping-pong tables, and take employees away for all-staff conferences?

[HT: Marginal Revolution, back in May last year]