Under The Sun

Wednesday, March 19, 2003


"[...] the classical-liberal "night watchman" state--the government that has only two employees: a judge to decide who is right when contracts are disputed, and a constable to make sure nobody steals anything after dark--is a historically-unique, unusual, sophisticated, and immensely powerful politico-social institution. Think of it: The night watchman state must be able to enforce contracts--it must have, in reserve, sufficient authority and force that what its judges command actually happens. The night watchman state must be able to control local notables--it must be able to keep them from applying pressure to sign over property or other rights that those without local wealth, authority, prestige, and dependents cannot resist. (One thinks of the current wave of stories of WalMart managers forcing employees into mandatory, unpaid overtime.) Most important, the night watchman state must be able to control its own functionaries--so that equal and exact justice is administered according to law, rather than according to who is the mayor's cousin or who has offered the biggest bribe.

"In short, a government can be weak--can be the background rule maker for a laissez-faire economy--only if it is immensely strong."

--Brad DeLong, reviewing Brink Lindsey, Against the Dead Head: The Uncertain Struggle for Global Capitalism

"[E]conomic liberals are always seen demanding less government intervention, and so develops the misconception that 'the less government, the better' is the sum and substance of their position. But the situation is altogether different for roughly five billion of the earth's six billion people [...]. it is the underdevelopment of legal institutions that is especially debilitating. In a continuum from bad to worse--from corrupt officials and inadequate courts, to laws so dysfunctional that many or most people are chased into the informal sector, to the arbitrary confiscations of kleptocratic misrule, to the chaos of Hobbesian anarchy--the poorer countries are all plagued by the insufficient protection of property and contract rights. Under these conditions, most economic activity is confined to what Olson called "spontaneous" or "self-enforcing" markets--markets based on personal relationships or face-to-face contact. But those markets, however resilient and durable, cannot produce the division of labor upon which affluence depends [...]"

--Lindsey, p. 175

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