Scholars have suggested several ways in which economic development could affect interstate conflict. Supply side arguments view modern economies as more difficult to subdue or exploit through force (i.e., development creates states that are 'bitter pills'). The demand side perspective argues in contrast that development lessens the appeal of conquest among potential aggressors (i.e., development creates 'prosperous pacifists'). We offer a formal model that isolates contrasting consequences of development for initiators and targets. We use a directed dyad research design to test hypotheses drawn from the model on measures of territorial conflict. The development of potential initiators, not of possible targets, discourages conflict among nations.