A Critical Review of Strategic Conflict Theory and Socio-political Instability Models

This paper provides a critical general overview of two strands of recent vast economic literature on social conflicts, namely strategic conflict theory and socio-political instability models. The first strand can be traced back to Haavelmo [1954] and has been further developed in a variety of ways by game theoretical models of rational conflict (Boulding [1962]; Schelling [1963], Hirshleifer [2001]). Their goal is to understand threat power. A second version of conflict theory has been developed by the founders of the Public Choice School (Olson [1965, 1982]; Tullock [1974, 1980]; Stringham [2005, 2007]) in order to tackle genuine political violence. The main finding of this paper is that both strands of recent economic literature have not yet come to grips with social conflicts. The application of standard microeconomic assumptions to the field of "social conflicts" has resulted in reducing conflicts either to "rational conflicts"- a threat of conflict without any real clash - or "real self-interested private conflicts". In other words, economic theory has considered social protesters either as looters or lunatics, but never as a group of people struggling for a common cause.