Previous authors have analyzed the State as a tax-maximizing corporate entity. The historian Edward Gibbon (1776) treated the Roman state as maximizing the returns from warfare when he described the role that increasing costs and declining benefits had in shaping Roman history. Gibbon, though, undoubtedly drew his analysis from the statements of Caesar Augustus himself, who likened conquests to fishing with a golden fishhook, where the expected payoff had to be measured against the risk (Starr, 1982:19). 4
In The Decline and Fall of the Roman Empire Gibbon (1984:1) wrote:
The seven first centuries were filled with a rapid succession of triumphs; but it was reserved for Augustus to relinquish the ambitious design of subduing the whole earth, and to introduce a spirit of moderation into the public councils. Inclined to peace by his temper and situation, it was easy for him to discover that Rome, in her present exalted situation, had much less to hope than to fear from the chance of arms; and that, in the prosecution of remote wars, the undertaking became every day more difficult, the event more doubtful, and the possession more precarious, and less beneficial. (italics added) Gibbon presented a marginal economic analysis of territorial expansion, a theory of the "optimal" level of conquests, approximately 100 years ahead of marginal analysis in economics. Almost all necessary ingredients of a modern economic theory of conquests are included here, with rising marginal costs of conquests, falling marginal benefits and even falling probabilities of success. The rising marginal costs and the falling marginal benefits are due primarily to the natural heterogeneity of the world and the logistical problems of conquest and control over greater distances from the home base. The potential conquests were at different distances from Rome, had different amounts and types of wealth to be taken, and had varying degrees of military capability. With wars fought for gain, the first countries to be invaded were those with great wealth, those nearby and those that were relatively weak. Once those were defeated, the remaining countries were obviously less profitable.
While Gibbon?s calculus of conquests presents an excellent explanation of the end of Rome?s expansion, Gibbon does not examine how these benefits and costs affected individual decision makers. In this paper, the familiar social vs. private costs and benefits approach helps to explain Roman expansion and the very costly transitional civil wars.