Organizing a Kingdom
Abstract: We develop a framework that examines the organizational challenges faced by centralized rulers when governing their territories, highlighting the tradeoff between delegation and coordination. In our model, the ruler is privately informed about the state of the polity (e.g., war threats). The ruler interacts with landed and urban local elites who need to adapt their local economic decisions to both the common state of the polity and to their own local economic states. The ruler ‘organizes the kingdom’ by choosing the administrative structure as well as the communication channels with the two elites. When towns are relatively unimportant economically, the rural elite controls the administration of towns, serving also as intermediary for communication between the ruler and the urban elite. As towns grow (e.g., Commercial Revolution), the ruler benefits from allowing the urban elite to run their own town administration. However, this results in less reliable information flows between the two elites, prompting the ruler to establish direct communication also with town elites, summoning them to parliament. This leads to policies that give greater weight to towns. Our framework can explain the emergence of municipal autonomy, towns’ representation in parliaments and, more generally, the economic and political rise of urban elites and the corresponding decline of the landed aristocracy that occurred throughout Western Europe in the early modern period.
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