1980, Brewer 1988 and Kiser and Kane 2001] and high in France [Kiser
and Kane 2001]. Brewer [1988] writes at length about the extensive mon-
itoring in the English administration and how officials were discouraged
to steal from the government.30 Brewer also reports that the number of
“supervisors”, supervising officials, increased by 469 percent from 1690
to 1780 whereas the number of excise officials increased by only 280
percent, which indicates that the probability of monitoring significantly
increased in this period.
IV. Robustness Analysis: Commitment to the Fee
If the CA could not commit to investors, it may not have been able to
credibly commit to its own officials. As a check for robustness, we there-
fore include the possibility that the CA cannot commit to the variable
fee, θ.
Assume that the CA can commit to the fee, θ, with probability (1-λ).
With probability λ the CA will take θs instead where s>1.31 From
the official’s ex-ante perspective, the expected fee is therefore equal to
θ((1- λ) + λs). The equilibrium number of permits provided by the
agent is in this augmented model equal to q*(θ) = a—θ(1~-λ+λs) and the
CA’s expected up-front payment is ε(B*(θ)) = n+- (a-θ(1-4λ+λs)) . The
amount the CA can borrow ex ante is given by the net present value of its
30 Contemporaries for example described the Excise as “the monster that has ten
thousand eyes and condemned the excise man as watchful to excess.” [Brewer, 1988
p. 113] Brewer also writes colorfully “An officer’s supervisor was likely to swoop into
his round at any moment, take up the exciseman’s entry book and follow him on his
journey, checking his gauges and ensuring that he had left specimen papers at the
premises he had declared he would inspect.” [Brewer, 1988 p. 109]
31An absolutistic central authority would expropriate the official’s whole profit ex
post. We assume that it is not absolutistic and it can therefore only take θs.
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