Why not taxation and representation? British politics and the American revolution.

• We offer a new perspective on the American Revolution based on modern economic theory. • We develop a game-theoretic model of the institutional regime that governs the politicalrelationships between a metropolis and its colony. • We use the model to explain why the British did not grant American colonies representation in the British Parliament and quickly settle the dispute, a proposal considered by Adam Smith in The Wealth of Nations. • American representation would have shifted the balance of power within Britain in favor of radical political reform. Fearful of this path, the British incumbent coalition chose to go to war. Why did the most prosperous colonies in the British Empire mount a rebellion? Even more puzzling, why did the British do not agree to have American representation in Parliament and quickly settle the dispute peacefully? At first glance, it would appear that a deal could have been reached to share the costs of the global public goods provided by the Empire in exchange for more political autonomy and/or formal representation for the colonies. (At least, this was the view of men of the time such as Lord Chapman, Thomas Pownall and Adam Smith.) We argue, however, that the incumbent government in Great Britain, controlled by the landed gentry, feared that giving political concessions to the colonies would undermine the position of the dominant coalition, strengthen the incipient democratic movement, and intensify social pressures for the reform of a political system based on land ownership. In particular, allowing Americans to be represented in Parliament was problematic because American elites could not credibly commit to refuse to form a coalition with the British opposition. Consequently, the only realistic options were to maintain the original colonial status or fight a full-scale war of independence. [ABSTRACT FROM AUTHOR]