Ramsey in dual-population lands: internal conflict and utility-maximizing consumption
Ramsey's model is extended to three possible scenarios of conflicts in dual‐population lands: partition, federation and civil war. The federally utility‐maximizing consumption‐growth rate in a strictly political federation might be lower than that under partition for the wealthier and more slowly multiplying group. This group may benefit from joining a federation that facilitates technological transfer and from obeying the federal no‐arbitrage rule as long as its own technology is inferior to the hybrid. The utility‐maximizing consumption growth rate for a group engaged in a civil war is larger than those under partition and a strictly political federation if its rival's warfare is mainly aimed at inflicting casualties and is likely to be smaller when its rival's warfare is mainly sabotage.