INTRODUCTION

One way to understand the logic of the Declaration of Independence is to attempt an estimate of the costs and benefits and plausible subjective probabilities associated with various outcomes that could follow from the Declaration. While it is true that a general belief that “taxation without representation is tyranny” gained ground in the colonies in the period after the end of the Seven Years War in 1763, the studies that have been carried out do not appear to give a realistic account of the motivations of the British and American decision makers. In particular, in declaring independence, the members of the Continental Congress expressed a willingness to accept the great costs of war. To simplify greatly, each member of Congress should rationally compute the expected costs of war after such a declaration (say qC, where q is the subjective probability of war, and C the subjective cost) against the expected costs of the status quo (involving the probability that the British intended tyranny, T being the cost of this tyranny). I give a more precise form of this calculation below. Presented in this fashion, it is evident that unless the magnitude of T is very high, then an “expected utility maximizer” would not choose independence. An alternative way of interpreting this decision problem under risk is to regard the absolute value of T as some prize to be gained by the Colonies through a successful prosecution of a Revolutionary War. I argue that avoidance of taxation is simply inadequate as a sufficient prize.