3.War Making and State Making Why do states Exist at all? A.Institutional economics: States exist because they are needed to solve various transaction costs. B,Classical political Theory (Hobbes,Locke, etc): Contractual approach.People "demand' authority for sake of security3. War Making and State Making Why do States Exist at all? A, Institutional economics: – States exist because they are needed to solve various transaction costs. B, Classical political Theory (Hobbes, Locke, etc): – Contractual approach. People “demand” authority for sake of security