Centre for Civil Society hosted Tom G Palmer for a 'Chintan' on 22 July 2014 to discuss market-based solutions to public policy. Tom Palmer is Vice President for International Programs at the Atlas Economic Research Foundation, and General Director of the Atlas Global Initiative for Free Trade, Peace, and Prosperity. He previously served as Vice President for International Programs at the Cato Institute and Director of the Centre for Promotion of Human Rights. He is a Senior Fellow at the Cato Institute and Director of Cato University, the Institute’s educational arm. He is the author of Realizing Freedom: Libertarian Theory, History, and Practice. He has also edited a number of publications, including The Morality of Capitalism and After the Welfare State. He received his BA from St. Johns College, MD, his MA in philosophy from The Catholic University of America, and his doctorate from Oxford University.

1. Market Solutions to Public
Policy Problems
Dr. Tom G. Palmer
Centre for Civil
Society
22.July.2015

2. What is a Market

3. What is the relationship
between government and the
market?
 First:
 Distinguish
 Government
 State
 The Market

4. “What is a State?”
“a state is that human
community which
(successfully) lays claim
to the monopoly of
legitimate physical
violence within a certain
territory, this ‘territory’
being another of the
defining characteristics of
the state.” Max Weber (1864-1920)

5. From Roving Bandits to
Stationary Bandits
Mancur Olson (1932-1998)
“If the leader of a roving
bandit gang who finds only
slim pickings is strong
enough to take hold of a
given territory and to keep
other bandits out, he can
monopolize crime in that
area – he can become a
stationary bandit.”
--Mancur Olson, Power
and Prosperity

6. A State is an Organization
of the Political Means
Franz Oppenheimer (1864-1943)
The “economic means” and the
“political means”:
“There are two fundamentally
opposed means whereby man,
requiring sustenance, is impelled to
obtain the necessary means for
satisfying his desires. These are work
and robbery, one's own labor and the
forcible appropriation of the labor of
others.”
“The state is an organization of the
political means.”
--Franz Oppenheimer, The State

7. Do States Maximize Gross Domestic
Product (GDP) or Capture the “State
Accessible Product” (SAP)?
“The ruler…maximizes the state-
accessible product, if necessary,
at the expense of the overall
wealth of the realm and its
subjects.”
“the state-accessible product
had to be easy to identify,
monitor, and enumerate (in
short, assessable), as well as
being close enough
geographically….”
--James C. Scott, The Art of Not
Being Governed (2009)

8. What is a government?
The institution – meaning the procedures and the
organization – whereby we create and enforce
rules of behavior.
Examples include: Boards of directors,
Condominium Associations, Temple Boards, etc.
Remember: providing rules and providing
enforcement of rules are two different functions
and they need not be provided by the same
organization

9. Examples of Government:
Medieval “Communes” –
Independent Cities
“Stadtluft macht frei,
nach Ablaufe von
Jahr und Tag.”
“City air makes you
free, after the lapse
of a year and a day.”

10. Merchant Law
 The Lex Mercatoria
 Law produced, not by
rulers or states, but by
merchants
 The foundation of all
contemporary
international business law
 We all make law when we
make contracts:
 “Individuals make the
law insofar as they
make successful
claims.”
 Bruno Leoni

11. What is a
market
economy?
 “The market economy is the social
system of the division of labor under
private ownership of the means of
production. Everybody acts on his
own behalf; but everybody's actions
aim at the satisfaction of other
people's needs as well as at the
satisfaction of his own.”
 “[M]onetary economic calculation is
the intellectual basis of the market
economy. The tasks set to acting
within any system of the division of
labor cannot be achieved without
economic calculation. The market
economy calculates in terms of
money prices.”
 Ludwig von Mises, Human Action
 Exchanges on markets are “non-
tuistic.” Non-tuists are not interested
in the interests of those with whom
they interact. This sort of motivation
is neither egoistic nor altruistic.
 Philip Wicksteed, Commonsense of
Political Economy

12. How are they related?
 Markets require rules and mechanisms for
enforcement:
 Property, contract, liability, etc.
 Courts, bailiffs, collection agencies, etc.
 States can provide those rules
 But are states necessary for such rules to be
provided and enforced? That is an interesting
question to discuss later….
 States can also violate those rules
systematically and with great violence

13. Property Creates the Foundation for
Voluntary Cooperation
• Property sets the rules
of interaction
– Property rules are not
changed for this or that
person, but are common
for all
– The most important
property we have is our
property in our own
persons…our right to be
ourselves: 自 由
• Property Defines the
Baseline for
Improvement
• Improvements are measured
against a baseline
– If we do not freely exchange,
you keep what is yours and I
keep what is mine

14. Property Rights Avoid the “Tragedy of
the Commons”
• “If I don’t catch the fish,
someone else will…..”
• If everyone thinks that,
then all the fish are
caught and there are
none left..
• Property rights help us to
conserve resources
• Property rights create
incentives to maximize
the value of one’s assets –
known as the “capital
value”
If my cattle don’t eat that grass…
Someone else’s will
Each takes more than is sustainable and there
is no grass left

15. • Knowing what you
may do and what I
may do, what is
allowed and what
not, allows us to
cooperate peacefully
to attain our ends.
Legally Secured and Voluntarily Transferrable Rights
Provide a Secure Foundation for Social Cooperation

16. Key characteristics of property
• Respect for Property
– In One’s Person (Personal liberty and bodily
integrity)
– In One’s Freedom (Presumption of liberty; right of
exit)
– In One’s Estate (One’s objects and goods)
• Property in estate is characterized by the “Three D’s”
–Definable
–Defendable
–Divestible
• Corollaries of property solutions:
– Equality before the Law
– The Rule of Law

17. Sometimes a Market Failure
• Is a failure to have a market
– Because of a failure to define property rights
– Because of a failure to defend property rights
– Because of a failure to provide a judicial system
that allows transfers of property rights at low cost