I'll start this out by saying that this isn't some edgy "the legion did nothing wrong" post. Instead, I'd like to speculate that leaving Caesar alive would actually be more harmful for the legion than killing him.
If you speak with Boone or Mr. House after killing Caesar, they'll mention that doing so doesn't really change the threat that the legion poses at the Second Battle of Hoover Dam. Caesar may be the strategic mind behind the legion, but the person in charge of the force attacking Hoover Dam will be Lanius. So let's say you kill Lanius at the end of the game instead of talking him down; Caesar would just retreat across the Colorado River and start licking his wounds and get ready to try again, right? Not necessarily.
For as much as he waxes philosophical on how his soldiers fight for a set of higher ideals, Caesar's legion is a pretty blatant cult of personality. His legionaries swear "Ave, true to Caesar", not "Ave, true to the legion". This is because Caesar's legion differs from the Roman legions in a crucial way: they don't actually have a Rome to fight for. Caesar holds his legion together through loyalty to him, rather than loyalty to a shared identity. As such, his image as the divinely ordained son of Mars is critical to the cohesion of the legion as a whole. It's part of the reason why Joshua Graham was scapegoated like he was. It's not just because Caesar was being petty (he kinda was), but because Caesar himself must not appear to fail. Because if the unerring demi-god of the legion was just as fallible as the rest of us, doubt would begin to creep into the minds of the legionaries. So if you kill Lanius at the end of the game, Caesar has nobody to shove the blame onto. No matter how hard he may try to stop it, the legend of Caesar will be eclipsed by the specter of his failures at Hoover Dam.
But Caesar's image isn't just important in keeping the legion itself together, it's also integral to keeping the territories he's conquered in line. Caesar's territories in the east are kept docile through fear. Caesar himself described his legion as more of a nomadic army, meaning that the garrisons left behind to govern conquered territories would be relatively small. But there's a recurring line of dialogue often said by random NPCs as you progress through the story that mentions how the legion's elite forces are being brought in from back east. One of the most crippling aspects of Caesar's defeat at the First Battle of Hoover Dam was the loss of a significant portion of his elite veteran troops. So why would these valuable elite soldiers be dawdling about in Arizona during the lead-up to the Second Battle of Hoover Dam? I don't have any concrete evidence to support it, so it's only just a theory, but I believe that the legion's territories in the east aren't as stable and secure as they make them out to be. The First Battle of Hoover Dam showed the world that the Legion wasn't invincible, and their legend as an unstoppable military force began to wane. Conquered territories began to push back and rebel, forcing Caesar to send in his elites to quell the embers of insurrection. History has shown on numerous occasions that subjugated people don't obediently stay down forever, and especially not when their subjugators show signs of cracking. Losing at Hoover Dam a second time would definitively prove the legion's vulnerability to the people they conquered, and could result in the legion crumbling like a house of cards.
Now that I have hopefully established why the image of Caesar and the Legion are important, why do I believe Caesar should be left alive? To put it simply, killing him would make him a martyr. If he dies before the legion can be repelled at Hoover Dam, their loss won't be seen as his failing. The legion wouldn't remember him for who he was, but what he stood for. As Mr. House put it, he'd be deified. But we all know he isn't some sort sort of demi-god, just a charismatic egomaniac with a brain tumor. And why kill him when that tumor will do it for you? Why make a legend of him, when his failing mental faculties will slowly erode the legend that he built for himself? If you let him live, Caesar will eventually cease to be Caesar in the eyes of the legion. Killing him grants him a warrior's death in combat against you. But letting him live condemns him to a slow death, withering away as he helplessly watches the empire he built crumble around him. In a sense, Caesar IS the legion. And if all the legionaries remember of him as a feeble old man atrophying on his throne, then the legion itself will cease to be.
TL;DR: Letting him live is a cruel mercy, and will allow his decaying condition to ultimately undermine the legacy he tried to build for himself.
I'd love to hear any thoughts you guys have on this, since I could be totally wrong too.
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