The Economic Origins of the Territorial State

Abstract

What explains variation in the number and geographic size of states? Contrary to standard accounts, I find that before the French Revolution \textit{changes in patterns of economic development not the scale, frequency, or costs of war, explain variation in the number and size of units within the European system.}

I advance this claim in three steps. First, I show that assertions of a military revolution in the costs and scale of warfare are either exaggerated or simply do not appear when confronted with systematic data analysis. Then, using new data describing the entire universe of European states I demonstrate that the predictions made by war-making theories of state formation regarding changes in the size and number of independent states simply do not materialize in the manner predicted.

Second I build on models of elections and industrial organization to create a theoretical framework that can explain observed patterns of state formation. This formal narrative shows that even in a world of anarchic competition between states, patterns of economic geography can explain variation in the number and size of states. Unlike the sometimes abstruse logic of macro-sociological theory, I provide a micro-founded logic that yields a set of implications which can be readily brought to data.

The preponderance of this book is devoted to the third task, testing these predictions. This analysis represents the first set of statistical tests of theories of state formation that rely on systematically collected, large-N, data. In combination I provide evidence that changes in trade, commerce, and urban revival best explain patterns of state formation before 1790. The French Revolution and subsequent Napoleonic wars, however, forced upon states political changes that empowered commercial elites, did away with internal barriers to trade, and limited restrictive guild-based production. In doing so, these changes, produced economies of geographic scale leading to ``Smithian'' growth, thereby creating both economic and militarily incentives to establish and maintain large states.