The Industrial Organization of Violence

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Memo for Gov 2162Orientation of the Class

The purpose of this research is to investigate the “inner workings” of an armed political movement.  The manner in which such groups are organized both reflects and shapes their behavior.  In particular, it helps to determine the ease with which they can demobilize militarily and redeploy for peaceful forms of political competition.  If only for this reason – and, as I will argue, there are others as well – it is important to analyze the organization of militarized groups.



Recent literature on violence ( see especially (Hirshleifer 1994; Hirshleifer 1995)) emphasizes that it is purposeful.  Entities that engage in violence, scholars argue, resemble competitive firms, albeit ones that redistributes wealth rather than creating it.  Building on this insight, scholars have sought to explore the impact of violence on the allocation of property rights (Grossman 1991), the performance of economies (Hirshleifer 1995), the distribution of wealth (Skaperdas 1992), the occurrence of warfare (Azam and Mesnard 2003), and the use of terror (Berman 2000). 


From the very manner in which this research program has been conceived, the next step appears obvious.  Just as the theory of the firm (e.g. (Williamson 1985; Putterman 1986) was developed in order to move beyond reduced form representation of the supply side of markets, so too should we explore the inner workings of groups that produce violence.  We should study the industrial organization of violence.


Adopting this perspective implies studying:

  1. The way in which groups recruit labor and mobilize finances.
  2. The way in which they convert those inputs into a product, which we can think of as force.
  3. And the manner in which they deploy that force strategically, i.e. in a manner that is chosen
    1. Subject to constraints
    2. And in anticipation of the best response of their enemy.

In developing these points, it is best to begin with the last and to progress toward the first, as if engaged in backward induction.

The Political Environment

The literature on industrial organization relates the structure of markets to the behavior of firms (Tirole 1989).  The literature on public bureaucracies relates the conduct of public agencies to the nature of their political environment (e.g. (Moe 1994)).  This step too is important to the study of militarized groups.  To account for their choices, we need to look at the environment in which they operate.


This environment includes constraints.  Thus the finding that civil wars are more likely to be undertaken in countries with mountainous terrain (Fearon and Laitin 2003); in the absence of such terrain, insurgent groups adopt an alternative technology: terrorism (Krueger and Laitin 2003)  The constraints need not be physical, however; they can also be political.  In the short run, at least, institutions remain fixed and therefore number among the constraints faced by militarized groups.  Thus too the finding that terrorists, like other insurgencies, tend to originate not from countries that are relatively poor but rather from those that are authoritarian (Ibid.). 


Conceived broadly, the implication is that researchers should focus on what might usefully be called “the political geography” of the groups they study.  Important elements of this setting include:

  1. The physical terrain
    1. The distribution of population by region and economic sector (e.g. urban or rural).
    2. The density of the population
    3. The costs to the government of physically reaching the population to a) provide public services and b) to control it.
  2. The social and economic terrain
    1. Patterns of differentiation, particularly in wealth and power.
    2. The degree to which these differences map onto regional differences or cultural differences, such as in ethnicity or religion
    3. The degree to which such differences -- regional, ethnic, and religious -- map onto the structure of power, and especially onto a) the executive branch of government and b) the security services.
  3. The domestic political structure.

It is useful to think of the political system in terms of political opportunity structures (Tarrow 1998).  In particular, given the policy preferences of the group, how does the structure of the political system affect the costs and benefits that could be expected to accrue to different strategies: contesting elections, lobbying, demonstrating, bribing, or coercing – and to coalescing, or going it alone?

  1. The international environment

Political mobilization is costly.  Particularly in countries in which the government wishes and is able to constrain action by the organization, it will seek resources from abroad.  Changes in the geopolitical setting will therefore affect the costs and benefits that attach to given actions.

The nature of the environment, and the manner in which the leaders of the group conceive of and “map” it, should thus significantly affect their political choices, including the degree to which they engage in violence and the form of violence that they select.


The Internal Structure

The internal organization of the group is particularly important as the kind of structure that is desirable in one setting may not be so in another.  Were, for example, a closed political system to open, and thus electoral tactics become preferable to insurrection, some elements within the group (educated civilians) would gain from the change in tactics whereas others (battle hardened veterans) would become marginal.  Insofar as the organization of the group empowers the latter over the former, the group would be slower to respond to the incentives to demobilize.

Governance Structure

The internal structure of the group will contain both “horizontal” and “vertical” dimensions .  It would also include governing bodies in which representatives from these units make policy decisions.  We turn first to the latter.


Particularly important would be the exercise of power over:

  1. Finance
    1. The sources that are to be tapped.
    2. The concessions and services that are to be provided in exchange for them.
    3. Their expenditure.
  2. Personnel
    1. Promotions
    2. Assignment to tasks
    3. Dismissal or termination.
  3. Investment decisions: i.e. the launching of new ventures:
    1. Repositioning politically – changing partners
    2. Authorizing missions
    3. Opening a new campaign

The researcher should locate the committee in which such decisions are made; their composition, both in terms of individuals and units of the organization that gain representation in them; and the rules that govern their selection and their decision making.  Pay particular attention to the degree to which participation is concentrated, i.e. the degree to which certain individuals or units participate the making of decisions in more than one of these areas.

Vertical units

In functional terms, groups can be divided into several “wings”:

  1. An open wing: The public face of the movement.  Often this unit is engaged in representational efforts, presenting the groups case to the government in power, supporters and sponsors abroad, and the media.
  2. The military wing: These are the fighters or those that recruit, train, and command them.
  3. The intelligence wing: These are people in place – i.e. who occupy positions in the government but who perform services for the organization, particularly gathering information.

A key feature of the governance structure is the degree to which each unit is positioned within it.


Cross-cutting these functional divisions may well be others: units such as a youth wing, a women’s league, and so forth.  More often than not, these groups are more important to the public portion of the movement than to its military operations.  They also play an important role in recruitment (see below).

Horizontal Units

The units may usefully be partitioned into several strata:

  1. The strategists.  Those who define the mission of the organization, place it within an historical and actual setting, and provide justification for the sacrifices it may call for or inflict. 
  2. The executives: These are the people who manage the organization.  They stand at the top of the various vertical groups, exercise authority over the different functions, and participate in the governance structures that make the key decisions.
  3. The “ncos”: these constitute the operational core of the organization.  They staff and run its activities, be they recruitment, financing, or the running of missions.
  4. The rank and file.  Depending on the group, or the portion of its organization, these can be politically active civilians, agitators and disseminators of propaganda, gangs that are for hire, rent-a-crowds, thugs, or soldiers.

Given the stratification within such organizations, it is important to focus on their “internal labor markets.”  People who join are seeking a return on their commitment; in a broad sense, they are ambitious.  Those who recruit them are also seeking to identify those who can best perform.  Initially, then, the managers will assign new recruits to low level tasks where their actions can be monitored and their skills assessed.  Those who perform well will then be advanced, fulfilling their ambitions and replenishing the upper reaches of the organization with personnel of high quality. 


Within this internal labor market, however, certain problems arise.  One is the need to separate opportunists from those who are truly committed.  In striving for promotion, opportunists have every incentive to mimic those who are committed.  Because of the costs of betrayal and the fear of infiltration, the group therefore must devise ways of screening.  They therefore will often devise tasks that can be successfully performed only by those who truly share the goals of the group.


Another is the problem of lateral entry.  Particularly when groups merge or secure a new wave of converts, those who have invested in the fortunes of the group may find the prizes taken by those who had formerly been outsiders.  The failure of the top leadership to keep its commitment to reward costly service weakens incentives, and the impact can rapidly cascade downward through the organization.  The internal labor market may therefore fail to function productively.


A last problem is segmentation.  That is, the quality of the personnel may best be evaluated by those who closely supervise them.  The allocation of tasks and promotions may therefore come to be handled in a decentralized manner.  But the cost is the formation of clientelistic networks and factions within the greater organization.

Mobilizing Resources

As with any organization, armed groups must mobilize capital and labor.


One way of securing finances is by levying taxes.  A second is by extorting it.  A third is by seizing and operating firms.  A last is by securing donations. 


Each form of financing shapes the organization’s behavior (see the discussion in (Weinstein and Francisco Forthcoming)).  The first necessitates that policies be tuned or services provided in exchange for taxes.  The second requires no such exchange; it merely requires that the likelihood of punishment be sufficient to elicit payment.  Nonetheless, the organization does acquire a stake in the economic wellbeing of those from whom it is extorting funds.  To secure funds from enterprises, the organization must attract expertise and financial capital, again implying an element of accommodation (Haber, Razo et al. 2004).  And should wealthy interests voluntarily contribute funds, they are likely to seek means of ensuring that they money is properly employed.  In some cases, they may demand what amount to equity stakes in the organization, exchanging funds for control rights over policy making. Alternatively, they may maintain their distance but monitor the organization’s performance: the number of campaigns launched, the number of persons killed, etc.  And the organization then acquires an interest fulfilling performance targets.  In various ways, then, the providers of finance shape the behavior of the organization.


In recruiting personnel, the organization can provide services in targeted locales: clinics, sports clubs, churches, or schools in urban townships – to attract unskilled labor – or debating societies, cultural clubs, or churches in secondary schools and university campuses – to attract those with greater skills.  Those who staff these services can then monitor those who use them and select the most promising recruits.  Another is through “front organizations,” which are open in membership but managed by personnel from the parent organization.  A third is by way of the youth and women’s leagues and other affiliated organizations. 


Another way of recruiting is through merger: i.e. integrating religious groups, labor organizations, or ethnic associations into the organization.  While such a move rapidly increases the resources available to the organization, it nonetheless poses challenges to its managers.  Personnel recruited in this manner retain an interest in the primary unit; they may place a greater value on the costs of an action to that group than the benefits it may bring to the greater cause.  They may not adhere to the same operational code, which reduces the likelihood of successful collective action.  And both the creation of, as well as the failure to create, an integrated staff with a single promotion ladder can weaken incentives, as personnel from one organization may find reason to question the promotion of personnel from another who have not performed the same tasks or contributed in the same was as they.  In their efforts to build, organizations may therefore prefer to recruit incrementally, attracting a small number of selected individuals rather than to create a large membership.


The objective of this research is to collect information about the above features of the organization.  In preparation, I recommend that researchers briefly return to the literature on organizational behavior, including the works of (Barnard 1979) and (March and Simon 1993).  This literature has been extended to the study of insurgencies by Pye (Pye 1956), Selnick (Selznick 1952), and Popkin (Popkin 1981), and their writings should also be read.


The student should make certain to master the logic and intuition of models of moral hazard and adverse selection.  Even if possessing a command of the formal arguments, she might well wish to see how these concepts have been applied to politics; for that, she should read (Kiewiet and McCubbins 1991).  She should also study the examination and critique by in Miller (Miller 1992).


Autumn 2002


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Berman, E. (2000). "Sect, Subsidy and Sacrifice." Quarterly Journal of Economics 115(3).


Fearon, J. and D. Laitin (2003). "Ethnicity, Insurgency and Civil War." American Political Science Review 97(1): 75-90.


Grossman, H. I. (1991). "A General Equilibrium Model of Insurrections." American Economic Review 81(4): 912-921.


Haber, S., A. Razo, et al. (2004). The Politics of Property Rights : Political Instability, Credible Commitments, and Economic Growth in Mexico, 1876-1929. Cambridge, Cambridge University Press.


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Krueger, A. B. and D. Laitin (2003). Kto Kogo: A Cross-Country Study of the Origins and Targets of Terrorism. New York, Russell Sage.


March, J. and H. Simon (1993). Organizations. Oxford, Blackwell.


Miller, G. (1992). Managerial Dilemmas. New York, Cambridge University Press.


Moe, T. (1994). "Integrating Politics and Oraganizations: Positive Theory and Public Administration." Journal of Administrative Research and Theory 4(1): 17-25.


Popkin, S. L., Ed. (1981). Public Choice and Rural Development: Free Riders, Lemons, and Institutional Design. Public Choice and Rural Development. Washington DC, Johns Hopklins University Press.


Putterman, L., Ed. (1986). The Economic Nature of the Firm. Cambridge, Cambridge University Press.


Pye, L. (1956). Guerilla Communism in Malaysia. Princeton, Princeton University Press.


Selznick, P. (1952). The Organizational Weapon. New York, McGraw Hill.


Skaperdas, S. (1992). "Cooperation, Conflict, and Power in the Absence of Property Rights." American Economic Review 82(4): 720-738.


Tarrow, S. (1998). Power in Movement : Social Movements and Contentious Politics. New York, Cambridge University Press.


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Weinstein, J. and L. Francisco (Forthcoming). External Actors as a Source of War and Peace in Mozambique. Economic Models and Case Studies of Civil War. P. Collier, A. Hoeffler and N. Sambanis. Washington D.C., The World Bank.


Williamson, O. E. (1985). The Economic Institutions of Capitalism. New York, The Free Press.



Last updated on 11/10/2011