rudy on Nostr: Institutional transition and the problem of credible commitment - Boettke, Peter. ...
Institutional transition and the problem of credible commitment - Boettke, Peter.
Generalized prosperity cannot be had without a private property market economy, but such an economy cannot be established on a wide scale without a system of governance bound by general rules and strict limits established on state action, and a country cannot meaningfully institute general rules and strict limits unless the informal beliefs and institutions of the people in question legitimate those rules and limits.
To realize those gains from specialization and exchange, the theory goes, we establish institutions of governance and third-party enforcement of contracts. In most presentations, these institutions are identified with the establishment of the state—a geographic monopoly on the use of coercion. But once the state has been established to provide third-party enforcement so that anonymous exchange relations can be realized and the gains from trade and innovation can produce wealth and economic growth, the opportunity for confiscation of that wealth by public officials presents itself. The opportunism of public actors in their effort to profit through predation must be curtailed. It is this dilemma that led North (1981) to conclude that the state is both the source of economic development and the greatest threat to economic development.
Generalized prosperity cannot be had without a private property market economy, but such an economy cannot be established on a wide scale without a system of governance bound by general rules and strict limits established on state action, and a country cannot meaningfully institute general rules and strict limits unless the informal beliefs and institutions of the people in question legitimate those rules and limits.
To realize those gains from specialization and exchange, the theory goes, we establish institutions of governance and third-party enforcement of contracts. In most presentations, these institutions are identified with the establishment of the state—a geographic monopoly on the use of coercion. But once the state has been established to provide third-party enforcement so that anonymous exchange relations can be realized and the gains from trade and innovation can produce wealth and economic growth, the opportunity for confiscation of that wealth by public officials presents itself. The opportunism of public actors in their effort to profit through predation must be curtailed. It is this dilemma that led North (1981) to conclude that the state is both the source of economic development and the greatest threat to economic development.