Replacing a criminal punishment with another that both is more severe and has a lower ratio of punishment cost to amount of punishment, while reducing the probability of conviction to maintain the same level of deterrence, lowers both punishment cost and enforcement cost. Hence imprisonment is always dominated by execution and both are dominated by fines and other alternatives. Moden legal systems do not fit that pattern. One possible explanation is that the ability enforces to profit by convictions and produce costly rent seeking. Examples include product liability litigation, civil forfeiture, and fraudulent prosecution motivated by rewards in eighteenth0‐century England. the problem was avoided by the use of infficient punishments in the legal system of saga period Iceland and the private norms of Shasta County, California. Execution, while not directly profitable for enforcers, facilitates rent seeking through threats leading to out‐of‐court settlements.

Houses in cold climates are kept warmer in winter than those in warm climates, des pite the greater cost of heating in colder climates. It is shown that this is not only consistent with, but also implied by, rationality. The contrary intuition is based on a confusion between average and ma rginal cost. The same analysis implies that it is rational to keep th e thermostat setting constant throughout the heating season rather th an changing it with changes in external temperature. Copyright 1987 by University of Chicago Press.

If territory goes to the nation which values it most as a source of revenue, nations will be shaped to maximize joint revenue, net of collection costs. Trade, as a major potential revenue source, should imply large nations; rent should imply small nations; and labor should imply that nations will have closed boundaries or be culturally homogeneous (to maximize exit costs). I show how this fits the pattern of European experience from Roman times to the present. Results of preliminary numerical tests of predictions of the theory are given.

If territory goes to the nation which values it most as a source of revenue, nations will be shaped to maximize joint revenue, net of collection costs. Trade, as a major potential revenue source, should imply large nations; rent should imply small nations; and labor should imply that nations will have closed boundaries or be culturally homogeneous (to maximize exit costs). I show how this fits the pattern of European experience from Roman times to the present. Results of preliminary numerical tests of predictions of the theory are given.