Since the COVID-19 pandemic and the political upheavals that followed, concerns have grown that many Western democracies face authoritarian pressure and are becoming less democratic. This shift has renewed interest in one of political science’s most influential frameworks for understanding democratic and nondemocratic rule: Selectorate Theory, developed by Bruce Bueno de Mesquita, Alastair Smith, Randolph M. Siverson, and James D. Morrow in “The Logic of Political Survival” (2003).
The theory fits within the law & economics tradition because it offers an economic account of political behavior. It focuses on the incentives facing every leader and treats public law as endogenous to those incentives—that is, as the product of survival strategies operating within a given institutional framework.
Bueno de Mesquita et al.’s formal model has broad implications for public finance, yet they do not develop those implications into a positive fiscal theory, meaning a theory that explains how fiscal policy works rather than how it should work. This piece takes up that task, analyzing tax and spending laws as survival mechanisms that determine who is taxed and who receives benefits to keep the leader in power.
Political Survival Is a Numbers Game
In every political system, two groups within the total population (N) constrain the leader’s political survival. The selectorate (S) consists of everyone with a legal say in choosing the leader. In the United States, it includes all registered voters. The winning coalition (W) is the subset of S whose support the leader actually needs to retain office—the “essentials,” as Bruce Bueno de Mesquita and Alastair Smith later called them in “The Dictator’s Handbook” (2011).
W might consist of a majority coalition of voters. In a U.S. presidential election, for example, W includes the minimum geographic distribution of voters needed to win the Electoral College, supplemented in practice by party elites and major donors. Yet W need not exercise democratic control. In plutocratic or autocratic states, the support of a small coalition of business or military leaders may be enough to retain power.
Bueno de Mesquita et al. argue that leaders everywhere face a budget constraint. They must use a finite pool of revenue to provide members of W with economic benefits or risk replacement. The difference between democratic and authoritarian systems lies in the ratio of W to S, rather than in their leaders’ motives. Leaders in both systems are self-interested survivors.
In democracies, W typically constitutes a large fraction of S—often a majority of voters in parliamentary systems, though considerably less in plurality and Electoral College systems. In authoritarian regimes, W is only a small share of S. The leader needs to keep only a small inner circle loyal to remain in power. As the authors put it:
Polities can be characterized by more-or-less formalized mechanisms that allow some people to have the prospect of gaining access to valued goods dispensed by government while excluding others from even the chance of such access. (Bueno de Mesquita et al. 2003, 42)
Small-W regimes themselves exist along a spectrum. At one extreme, pure autocracies, such as monarchies and military juntas, combine a small selectorate with a minuscule winning coalition. At the other, institutionalized authoritarian regimes combine a large nominal selectorate with a restricted winning coalition.
In the Soviet Union (USSR), most adults had nominal voting rights, so S represented a large share of N. Yet the essentials—those who wielded real power through the Communist Party hierarchy—comprised only about 3% to 5% of the population, making the operative W/S ratio tiny. As the model predicts, Soviet leaders retained power by granting privileges and private goods to these essentials, who functioned as a distinct caste within communist society.
In liberal democracies, S likewise represents a large share of N, but W constitutes a much larger share of S. Under majority rule, W can approach half of S. Even in plurality and Electoral College systems, the ratio remains roughly an order of magnitude greater than the autocratic baseline. A U.S. president who provides benefits to only 5% of the population and stops producing public goods would not win reelection.
The large W/S ratio explains why democratic leaders provide benefits to a broad range of citizens and receive relatively modest compensation compared with their authoritarian counterparts. Dictators, by contrast, can direct most of the public budget to roughly 5% of their cronies through private payments, privileges, and immunities while providing little for the general population.
The W/S ratio thus shapes political behavior through what the authors call the loyalty norm. When that ratio is small—e.g., 3%—any given member of S has little chance of entering the winning coalition. Current members therefore have strong incentives to remain loyal to the incumbent. Defection will likely mean permanent exclusion from the flow of private benefits.
Spend Broadly or Bribe Wisely
Putting the “law” in “law & economics,” the model’s central application concerns tax-and-spending laws. Bueno de Mesquita et al. explain and predict how governments extract resources from the productive population and distribute them as public goods, private goods for the essentials, or discretionary funds for the leader.
In systems with a large winning coalition (W), as in mature democracies, leaders must satisfy a broad share of the population to retain power. This alignment between leaders’ incentives and the interests of much of the population distinguishes democracies. The cost of providing private goods rises with the size of W, so supplying private benefits to millions of people becomes prohibitively expensive under any plausible budget constraint. Large-coalition leaders therefore turn to public goods.
Public goods are nonrivalrous and nonexcludable. One person’s use does not reduce their availability to others, and the government cannot easily limit their benefits to particular people. They can therefore benefit the entire population without costs rising in proportion to the coalition’s size.
Switzerland offers a striking example. Its government provides high-quality public goods and infrastructure while maintaining a comparatively low tax-to-gross domestic product (GDP) ratio of roughly 27%, among the lowest in the Organisation for Economic Co-operation and Development (OECD). Many other large-coalition democracies, including Sweden, France, and Germany, have considerably higher ratios. The basic model does little to explain this variation among democracies.
Small-W regimes create different incentives. When a leader depends on only a few essentials—as in a military junta, a one-party state, or an autocracy operating behind rigged elections—investment in public goods is politically inefficient because the benefits extend far beyond the coalition that keeps the leader in power. The leader instead directs the budget toward private goods that can be limited to W, including bribes, direct transfers, and legal immunities.
The loyalty norm makes this strategy cheap. Coalition members know that if they defect, they have little chance of entering a challenger’s W because the challenger can choose replacements from the much larger selectorate (S). The essentials therefore accept smaller private payouts than they would if defection offered a realistic path into a new coalition, leaving the leader with more discretionary funds.
The state thus favors private corruption over public investment because political survival rewards that choice.
Tax Policy as a Survival Strategy
The logic of political survival applies to taxation as much as to spending. For tax policy, the model predicts that large-W systems will tend toward moderate rates applied to a broad base, typically income or consumption. In other words, the government taxes many people or transactions at relatively modest rates. This prediction tracks a general observation in comparative tax design (Baskaran 2014; Genschel & Seelkopf 2016).
The model treats this design as a strategic necessity. Excessively high tax rates, or punitive taxes targeting people outside the coalition, would create an “expropriatory” environment that encourages people to favor leisure over productive labor (Bueno de Mesquita & Smith 2011). The resulting decline in economic activity would reduce the revenue available to fund the public goods that keep a large share of the population satisfied. Large-W systems therefore tend toward a high-growth, low-tax equilibrium because the leader’s tenure depends on maximizing total economic output rather than extracting more revenue from a shrinking economy.
Small-W systems create different incentives. Democratic regimes must generate a surplus. Autocratic regimes extract that surplus and distribute it to the winning coalition (Albertus 2015). Because the productive population overlaps little with the coalition, the autocrat and the essentials bear little of the deadweight loss caused by high taxation—that is, the economic harm that taxes cause by discouraging work, investment, or production. Selectorate Theory therefore predicts high tax rates in small-W regimes and helps explain why average rates in dictatorships are often much higher than in democracies.
In small-W systems, taxation transfers resources from N to W. It enriches the essentials and, just as important, impoverishes those outside the coalition. Both effects help the leader survive. Transfers buy the essentials’ loyalty, while reducing outsiders’ wealth weakens potential challengers. Wealthy outsiders might otherwise have the resources to finance a rival coalition.
Tax law also becomes a discretionary tool for rewarding loyalists and disabling challengers. Coalition members receive tax exemptions and favorable audit treatment (Wang 2015; Blaydes 2011), while opponents and dissidents face higher rates and selective audits (Leon 2014). Small-W regimes thus replace the large-W structure of broad tax bases and uniform rates with targeted taxes and selective enforcement (Dodlova and Lucas 2021).
Tax Law’s Democratic Guardrails
The book explains how political leaders survive. Institutional rules determine the size of W relative to S—the share of the selectorate whose support the leader must secure with economic benefits. Whether W is large or small shapes the resulting tax-and-spending system.
In democratic regimes, W constitutes such a large share of S that public goods offer the most efficient means of retaining power. Governments fund those goods through moderate tax rates applied to a broad base, which limits deadweight loss and sustains the economic growth on which the leader’s tenure depends.
When W is small, public goods do little to secure the leader’s survival. Leaders instead direct bribes and legal immunities to the narrow political caste that rules society. Fiscal policy becomes another tool for staying in power. It redistributes wealth from the public to the political class, rewards cronies with favorable exemptions and friendly audits, and punishes dissidents through higher rates and selective enforcement.
The model leaves legal scholars with a normative question. If tax law is part of the authoritarian playbook, how should the law constrain the power to tax to prevent further democratic backsliding?
Further Reading
- Bruce Bueno de Mesquita and Alastair Smith, “The Dictator’s Handbook: Why Bad Behavior Is Almost Always Good Politics,” PublicAffairs (2011).
- Mary E. Gallagher and Jonathan K. Hanson. “Power Tool or Dull Blade? Selectorate Theory for Autocracies,” Annual Review of Political Science, Vol. 18 (2015).
- Yuhua Wang, “Tying the Autocrat’s Hands: The Rise of the Rule of Law in China, Cambridge University Press (2015).
- Steven Levitsky and Daniel Ziblatt, “How Democracies Die,” Crown (2018).
- Gerald M. Easter, “Capital, Coercion, and Postcommunist States,” Cornell University Press (2012).
- Mancur Olson, “Dictatorship, Democracy, and Development,” American Political Science Review Vol. 87, No. 3 (1993).
- Charles Delmotte, “Equality Before Tax Law,” Washington & Lee Law Review Vol. 83 (2026).
