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From: janw@inmet.UUCP
Newsgroups: net.politics.theory
Subject: Re: Role of the state in the economy
Message-ID: <28200140@inmet.UUCP>
Date: Mon, 7-Oct-85 03:17:00 EDT
Article-I.D.: inmet.28200140
Posted: Mon Oct  7 03:17:00 1985
Date-Received: Wed, 9-Oct-85 06:53:20 EDT
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Nf-From: inmet!janw    Oct  7 03:17:00 1985


> [Richard Carnes : carnes@gargoyle]
> The creation of the state in antiquity was the necessary condition
> for all subsequent economic development.  What the state does is to
> provide the basic rules of the game, almost any set of which is
> better than no rules.  The rules have two objectives:
> 
> 1.  To provide a structure of property rights which specify the
> fundamental rules of competition and cooperation, in order to
> maximize the income of the ruler; in other words, to specify the
> ownership structure in factor and product markets.
> 
> 2.  Within this framework, to reduce transaction costs in order to
> maximize the output of society and thus increase tax revenues.  The
> state does this by providing a set of goods and services (protection
> and justice) that lower the cost of specifying, negotiating, and
> enforcing the contracts which are basic to economic exchange.  The
> economies of scale provided by systems of law, justice, and defense
> are basic to civilization.  ...
> 
> Note that there is a potential conflict between the first objective,
> designed to maximize the ruler's (or ruling class's) own income, and
> the second, designed to maximize the society's output.  This may be
> the root cause of the failure of societies to achieve indefinitely
> sustained economic growth, although ancient Egypt, Greece, and Rome,
> as well as modern societies, all experienced lengthy periods of
> economic growth.  This was made possible by the state's provision of
> a framework for economizing on the use of resources.  

 Congratulations on  a  well-presented  case.   You  realize,  of
course,  that you are arguing as a pure-bred conservative: it was
always done this way, you say, and for a good  reason,  so  don't
try  to  change it.  And, of course, you are arguing at a tremen-
dous advantage: most of empirical data is, of necessity, on  your
side.   Minarchist  and  anarchist societies are, in history, few
and far between; they are also *small*  (even  the   world   com-
munity  of  states  that Nat is citing, has few members, although
these have many submembers).

Every conservative has that advantage; but it should  be  largely
discounted;  if  it  is not, nothing new will ever have a chance.
The only thing that a conservative,  as  such,  has  a  right  to
demand  of  an innovator, as such, is that the latter proceed 
non-violently, and at first try out  his ideas on  a
small  scale.  E.g.,  as  test for socialism, a kibbutz is better
than a Cuba.

In this respect, libertarian ideas are singularly  fortunate.
Anarchist  and  minarchist communities abound: this net is one of
them. (Other examples include the "republic of   Letters",   many
clubs, some  families,  the  stock exchange). Libertarian reforms
can be introduced incrementally: e.g.,   airline   deregulation.
That  libertarianism    can only  win through non-violent methods
is almost self-evident from  its  basic  principles:  you   can
hardly coerce  people  to  be  free from coercion.

Your text quoted above is an (admirable) formulation of a kind of
Hobbesian model of society as applied to economics: an all-powerful
"ruler" (or ruling class) treats society as so much  livestock  -
and  the society concurs because this is better than anarchy (which
is identified with  chaos).   The  only  remaining  interplay  is
between  the  ruler's  own  long-term and short-term interest (on
which you make interesting historical observations).

A useful simplification that has value  beyond  this  discussion.
But  just  as Hobbes could only deduce absolute monarchy from his
model (this is true with some qualifications that would be out of
place here), yours, too, has its limitations.

In subsequent discussion I will ignore the fact that you only
speak of the rules of *economic* game; I will extend it to
*all* voluntary social activities. I do not see that it
weakens or strenghthens your case. But if you see
this as a straw man, just skip the next paragraph.

 Your thesis then becomes, more or less, that trade or any  other
kind   of  voluntary   interaction  between  individuals  has  to
proceed according to some rules, and  the   rules    have    to
come    from    an  external "ruler". They cannot be a product of
the interaction itself.  Possibly that, in your view, would im-
ply  a  paradox;  and certainly  there  would be a non-linearity.
This is why Hobbes (as you) endows his "sovereign"  with   unlimited
power:   limiting  him would  make  him  *part*  of the interplay
of forces, and require another ruler to regulate this.   However,
you  admit  of a  distributed  "ruler" (ruling class); and this
is true to life as we observe it.  (In fact  this   class   can
include,  with  lesser  or greater  weight,  most  of the popula-
tion). But if the "ruler" is not an individual, you run into  the
same  kind  of  paradox  (if paradox  it be) as quoted above: the
rules set by the "ruler" are themselves result of an interplay of
forces, which interplay  has to have rules, etc.

 So, collective self-regulating, uncoerced activity has to  be
possible;  in  fact it occurs all the time; this discussion is an
example; children's play is another.  The  reason  children  obey
rules  of  a  game is not coercion; if they have a leader,
they obey him (better than they do their parents), but he
does not (usually) enforce his authority by punishments.
The incentive is *for the game to go on*.

 The question remains: can a whole society function in a similar
way? The answer is yes, such societies have existed. True,
they were few and small - but the same has been routinely said, a few
centuries ago, about *republican* government. It might be fit, it
was argued, for a city state, and even there it was unstable.
But a genuine, large nation like France must be a monarchy,
or it will sink into chaos.

Anyway, *your* argument does not impose a  size limit; it seems
to prove that economic development would be completely impossible
without a strong state; thus it proves too much.

Finally, a historical point.

>                             Individuals who have been given a choice
> between a state, however exploitative, and anarchy, have, throughout
> history, chosen the state.  Libertarians need to be able to give a
> satisfactory explanation for this uncooperative fact.  

But some anarchist  or almost-anarchist  societies  have  histor-
ically  been  *populated*  with  refugees  from states. Examples:
(1) early Iceland; (2) Cossack communities in south  Russia   and
Polish Ukraine (15-17 centuries).

		Jan Wasilewsky