Does the State Create the Market - And Should it Pursue Efficiency?
28 Pages Posted: 6 May 2010 Last revised: 8 May 2010
Date Written: May 5, 2010
Many of today’s proposals for expanding government’s role in private life have at their core a deeply fallacious conception of the nature and function of markets, specifically, the notion that government creates the market by defining and enforcing property and contract rights. On this premise, it is claimed that there is nothing particularly wrong with government radically altering those rights, or the other terms on which individuals are allowed to engage in economic transactions, because such alterations are not infringements on pre-existing freedom, but merely shifts in the distribution of rights that the state created in the first place. This article challenges this premise and defends the classical liberal proposition that markets do, in fact, come first. The state is neither historically nor ontologically prior to the market. Nor is it prior to other types of free human interactions. It can therefore assert no “ownership” claim over the market as a justification for controlling individual economic choices. After addressing these issues, I conclude with some observations on a related argument: the contention that government policy should be organized in such a way as to increase economic efficiency.
Keywords: efficiency, markets, natural rights, Sunstein, Tribe, state of nature
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