Hobbesian Hierarchy: The Political Economy of Political Organization

Hierarchy is a nearly ubiquitous form of political organization. This article examines the concept of hierarchy and addresses three questions. What is hierarchy? When is it selected? Why does it matter? I outline and make explicit a theoretical approach common to the disparate literatures on political parties, domestic structures, and international relations. Drawn from the theory of the firm in economics, this relational contracting approach focuses on how hierarchy reduces transaction costs and safeguards specific assets, and it explains the nature and persistence of hierarchy and why it develops in some strategic settings and not others. Relational contracting theory has clear limitations, however, whose gaps are highlighted and sometimes filled by alternative approaches to understanding hierarchy. Integrating relational contracting theory with these alternatives promises a more complete approach.