This post is a summary of my thoughts after reading The Dictator’s Handbook by Bruce Bueno de Mesquita.

This book analyzes political policy through rational economic thinking and a high degree of cynicism. Instead of focusing on political ideas or party beliefs, it keys in on the individuals in power and their decision making.

It assumes that leaders optimize their decision making with the selfish goal of staying in power. While there are exceptions to this, the thought experiment appears to frequently give great insights.

To begin, it’s important to understand three groups within a political landscape:

  1. Interchangeables - the total pool of people that could potentially support a leader
  2. Influentials - the people who actually have influence
  3. Essentials aka the winning coalition - the people whose support is required

A leader’s strategy for maintaining power comes from understanding the dynamics of these groups. The most important is the essentials, with whom a leader must have a good relationship with. With their help, he is able to stay in power and, in turn, they can benefit from it. No leader rules alone.

Being in power, the leader has access to resources and some discretion on how they are allocated. If the leader only depends on a small body of essentials, then he can rely on private rewards to maintain their influence. If he depends on many essentials, then the available reward to distribute becomes too little to benefit any individual.

Pretend that the President of the United States set aside $100 billion to reward his essentials. If this is the voting public, then a 50% majority comes out to be about $600 per person. It’s hard to believe many would be willing to change their vote over this.

In contrast, pretend that the Electoral College could accept bribes with no consequences. Suddenly only 270 people need to be bought out. That’s $370 million per person. A much more compelling amount to sway a vote.

In the former, a democracy, the influence really does come from the will of the people - or at least a subset of it. Private rewards don’t work, so the leader must spend tax revenue on public rewards (e.g. infrastructure) and create the best policies. Spending tax revenue on private interests is bad policy and a quick way to lose support.

In the latter, an autocracy, the peoples’ interests don’t matter. The leader can use tax revenue on private benefits and pay off their essentials backers. Any public rewards (e.g. basic education) are only for ensuring that tax revenues will be consistent.

This is a great mental model for quickly understanding how countries operate. It gives an insight into both its economic growth prospects as well as the quality of life of the people. It’s also helpful for forming an opinion on public policy such as foreign aid.

Here are some notable highlights:

“Those in power differ from the rest of us: they can design rules to their advantage and make it easier for them to get what they want.”

“We must accustom ourselves to think and speak about the actions and interests of specific, named leaders rather than thinking and talking about fuzzy ideas like the national interest, the common good, and the general welfare.”

“Politics, like all of life, is about individuals, each motivated to do what is good for them, not what is good for others. […] National interest might have been on each of their minds, but their personal political welfare was front and center.”

“When debt exceeds the ability to pay, the problem for a leader is not so much that good public works must be cut back, but rather that the incumbent doesn’t have the resources necessary to purchase political loyalty from key backers.”

“The calculus of politics is to figure out how much a leader can keep and how much must be spent on the coalition and on the public if the incumbent is to stay in power.”

“Rules to Govern: 1) Keep your winning coalition as small as possible. 2) Keep your nominal selectorate as large as possible. 3) Control the flow of revenue. 4) Pay your key supporters just enough to keep them loyal. 5) Don’t take money out of your supporter’s pockets to make the people’s lives better.”

“Paying supporters, not good governance or representing the general will, is the essence of ruling.”

“The three most important characteristics of a coalition are: (1) Loyalty; (2) Loyalty; (3) Loyalty.”

“In a phenomenon often called the resource curse, nations with readily extractable natural resources systematically underperform nations without such resources. Resource-rich nations have worse economic growth, are more prone to civil wars, and become more autocratic than their resource-poor counterparts. […] Natural resources are wonderful for leaders. Unlike getting their subjects to work, leaders don’t have to encourage natural resources to work.”

“It is ironic that while oil revenues provide the resources to fix societal problems, it creates political incentives to make them far worse.”

“Democracy, especially with little or no organized bloc voting, aligns incentives such that politicians can best serve their own self-interest, especially their interest in staying in office, by promoting the welfare of a large proportion of the people. That, we believe, is why most democracies are prosperous, stable, and secure places to live.”

“Herein lies the basis for making foreign aid deals. Each side has something to give that the other side holds dear. A democrat wants policies his people like, and the autocrat wants cash to pay off his coalition.”

“[Pakistan] has also been careful not to wipe out the Taliban threat. Doing so would just lead to a termination of US funds.”

“It is perhaps ironic that while aid affords the resources to alleviate poverty and promote economic growth, it creates the political incentives to do just the opposite. […] When aid funds are used to substitute for government spending, then few, maybe even no one, has actually been helped unless the government uses the freed-up money for other projects of benefit to the general population.”

“Dictators are cheap to buy. They deliver policies that democratic leaders and their constituents want, and being beholden to relatively few essential backers, autocrats can be bought cheaply. They can be induced to trade policies the democrat wants for money the autocrat needs.”

“In the former cases, international financial institutions withdrew support and the nations democratized. In the latter cases, France stepped in with financial support and no reform occurred.”

“‘I believe neither in Islam, nor socialism nor tribalism, nor Somali nationalism, nor pan-Africanism. The ideology to which I am committed is the ideology of political survival.’”

“Democracy overseas is a nice thing to believe in, in the abstract. In practice it’s probably not what we, the people want.”

“There is always some principled way to defend any position, especially one’s own interests.”

“Our individual concerns about protecting ourselves from unfriendly democracies elsewhere typically trump our longer term belief in the benefits of democracy.”