Are states indispensable to markets?

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In our informality debate, Keith Hart and others have been vigorously taking me to task for arguing that states are 'indispensable for making markets work on a large scale.' Keith rightly points out that a lot of international market standards are privately enforced and work reasonably well. Chanayka says that regulatory evasion may be efficient when states are predatory rather than enabling.

Nothing much to argue with there, I say – except that there are many situations in which private enforcement is impractical, and there is no ready alternative to existing state structures. In which case, we should not be 'encouraging informality' but trying to document and learn from episodes in which governments and entrepreneurs have managed to construct and stick to political bargains.

Anyway, you can follow the debate here. And we've just launched a new reading list on enterprise formalization. This deals less with the causes, extent and consequences of regulatory non-compliance than with how policy-makers should respond to it. (If at all, that is.)

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