Property rights are arbitrary, but so too it seems are their enforcement. Suresh Naidu is working on research that suggests loose enforcement of property rights over people—that is, slavery—lead to hihger investments in public works and manufacturing, setting the stage for 20th century economic growth. It will be interesting to see how economic growth diverges after the Civil War between districts with strong property-rights enforcement over those with loose enforcement, though it will certainly be difficult to show that this effect is stronger than regional effects.
The hypothesis suggests that institutions are contextual. I doubt this research will lead a chorus of economists to reject the age-old wisdom that strong property rights enforcement is a pre-requisite for growth, but it does give us an interesting example (perhaps the only one) where weak enforcement leads to higher growth.
It also raises the interesting question of how to apply the principles of euvoluntary exchange to the issue of slavery. There is clear coercion by agency over the commodity, even if both legally-privileged parties to the slave transaction feel the transaction was euvoluntary. Whether or not it’s a euvoluntary transaction, we can all agree that this is a transaction that is morally reprehnsible.
In this case, even a euvoluntary transaction isn’t just.
I suppose we could discuss the possibility of a euvoluntary exchange between a mugger and a fence, if you grant the mugger qualifies under (1) and (2) so far as the fence knows, without getting hung up on the fact that the earlier "transaction" by which the mugger acquired the goods was not euvoluntary. But doesn't this exchange, which profits the mugger, incentivize more mugging, i.e. more violations of (5)?
ReplyDeleteSimilarly, we could discuss euvoluntary slave exchanges, and grant (1) and (2) between buyer and seller, without getting hung up on the earlier "transaction" by which the seller acquired slaves to sell. But wouldn't this exchange motivate more efforts to acquire slaves, i.e. more violations of (5). So out of social context, euvoluntary, but in context it would not be.
Separately, I'd agree with the statement "institutions are contextual," which is obvious as a descriptive matter and interesting as a normative claim. But I'm not sure what you mean by that remark here.
Mike, nice to see you over here. Thanks for your comment.
DeleteI like your analysis of the issue. It's very reasonable to assert that transactions engendering secondary effects that increase coercion are reprehensible. You didn't quite say this, but I think we're of one mind on that issue.
I'm not sure what I meant by contextual, either. I might have meant that successful institutions are tailored to time, place, and history. What works in the West may not work in the East, for example. I may have also been coming from an angle of "morality is contextual" as in "no absolute moral truths". It's a battle of hearts and minds. Where runaway slaves were not returned to their masters, a rule emerged that lead to better future economic prospects. Once hearts and minds were won elsewhere, or if you prefer, where spirits were broken and this moral imposed by law, we'd expect a similar economic transition to take place.