War, Transfers, and Political Bias∗

We examine the incentives for countries to go to war as they depend on the comparison of how much their pivotal decision-makers have at risk compared to how much they stand to gain from a war. How this ratio compares to the country at large is what we term “political bias”. If there is no political bias (a case that we loosely relate to a “pure democracy”), then there are always payments that one country would like to make to the other that will avoid a war. If there is a bias on the part of one or both countries, then war can result and in some cases cannot be prevented by any transfer payments. We also examine how stability among many countries depends on bias, as well as the importance of alliances in achieving stability. JEL Classification Numbers: C78, D74