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of the predatory state, the focus is on the aggregate level of state predation and treats predation as the political imperative of the ruler. There is no distinction between the principal and the agent. As a result, predation is conceived as an act of the principal. This formulation assumes, first, that state predation is universal. Because rulers are monopolists of both violence and public goods, state predation, in the form of taxes, is simply the price private producers of wealth pay for such monopolistic services. Second, the most important factor that limits the level of a ruler’s predation is his self-interest. To use Mancur Olson’s colorful analogy, a self-interested ruler behaves like a “stationary bandit” who is unlikely to risk his future revenue streams by looting the current stock of wealth of his subjects. He will raise taxation only up to the level that maximizes his tax revenues.69 Third, rulers are supposed to have an encompassing interest that is akin to the national interest.

In both theory and practice, centralized predation can spiral out of control. The ruler’s encompassing interest may diverge fundamentally from that of the state. For example, the ruler’s personal greed may become insatiable. He and his close cronies may loot wealth, not to provide public goods, but to line their own pockets, thus creating a kleptocracy. 70 The ruler’s encompassing interest may also become too ambitious for his nation’s good. Desire to acquire a larger territory (hence tax base) or international prestige may motivate the ruler to extract excessively from society to build a strong military.71 In addition, the ruler’s monopolistic position is always insecure because a domestic or foreign rival can seize his monopoly by force.72 This structural insecurity affects the ruler’s time horizon and the rate of discount on future revenues, incentivizing behaviors that result in short-term gains but long-term revenue losses.73 Finally, the absence of a third-party enforcer makes the ruler’s commitment to self-restrained predation not credible. Temptations for the ruler to break his promise and increase predation always exist, and most rulers have honored their promises in the breach.74

In the theoretical literature on decentralized predation, the emphasis is on predation by agents of the state. Although agency costs have been identified as a constraint on the ruler’s ability to maintain a desired level of extraction, the effects of such costs on state predation have not been explored until recently.75 Scholars who focus on the role of agents in state predation see decentralized predation as more harmful to the interest of the state. Andrei Shleifer and Robert Vishny demonstrate that centralized corruption, which is a form of monopolist predation, generates higher aggregate revenue for the state—because the state keeps its rate of extraction at the optimal level—than decentralized corruption (a form of predation by state agents acting as independent monopolists), which not only raises the overall level of theft (that is, making corruption more widespread), but also reduces the aggregate amount of income for the state. Since predatory agents simultaneously compete with one another for the same revenue, they have the incentive to steal everything, behaving essentially like Olson’s “roving bandits.”76 The welfare loss from decentralized predation is much greater than that from centralized predation.77 Decentralized predation, moreover, has emerged as a more prevalent problem today, as regime transition in many countries has restructured some of the key institutions governing principal-agent relations (more on the effects of transition on decentralized predation below).

To be sure, the relationship between centralization and corruption is a subject of scholarly dispute. Some scholars believe that decentralization may actually reduce the level of corruption. For example, decentralization can make local officials more accountable to the public because they can no longer hide behind the actions taken by higher authorities. Greater political