Arnold Kling  

North, Wallis, and Weingast

The Emerging Stagnant Majority... Today's Financial Reading...

Indeed, Violence and Social Orders is an important book. My guess is that many reviewers will complain about the editing and organization. Many points are repeated ad nauseum. Some reasonably important points are tossed off more casually. I'll quote some excerpts below. My main take-aways:

1. The libertarian view of the ideal of limited government is a fantasy. Instead, for NWW the best state is an open-access order. The law is administered impersonally. There is very broad access to the tools for creating and participating in both economic and political organizations. Political and economic organizations are expected to be able to outlive their individual leaders. In an open-access order, government is not small. However, the competitive environment does lead government to provide public goods, rather than serve as a mechanism for the dominant coalition to extract rents from the population at large. Some organizations can be economically important without wielding great political power, and conversely some organizations can be important in politics without have great economic power.

2. The alternative to an open-access order is a limited-access order--also called a natural state. In a limited-access order, there is a dominant ruling coalition. All of the groups with a potential for organized violence are part of the coalition. They partition economic and political power among themselves. They exclude others. For an organization to have economic power, it must have political power. The law is far from impartial, particularly with respect to conflicts between those within the dominant coalition and those outside the dominant coalition.

3. Everywhere before 1800, and in most countries today, one finds natural states. Open-access orders are very recent developments.

4. The transition from a natural state to an open-access order is not simple or automatic. For elites, the transition means going from having privileges to having rights, and these rights are then extended to those outside of the dominant ruling coalition.

5. For NWW, the transition to an open-access order in the United States was not marked by the adoption of the Constitution. Rather, it occurred gradually over the 19th century. A key was granting citizens the right to charter corporations for any purpose. This right was granted by individual states, as the result of a competitive process among state governments. Another key was the development of political parties.

6. Most people start with the assumption that the state has a monopoly on the legitimate use of force. NWW point out that this monopoly should not be taken for granted. In natural states, there are multiple organizations with a capacity for violence. Equilibrium is maintained by agreements over privileges and rents. Outside reformers complain about corruption. However, there is no way to end the corruption without destroying the equilibrium and risking civil war. Think of Iraq. Or Pakistan. Or Mexico.

p. 17:

Systematic rent-creation through limited access in a natural state is not simply a method of lining the pockets of the dominant coalition; it is the essential means of controlling violence.

p. 30:

The creation of rents through limiting access provides the glue that holds the coalition together...Only elite groups are structure contractual organizations. Limiting access to organizational forms is the key to the natural state...

if we begin thinking about the state by positing a single actor with a monopoly on violence, we assume away the fundamental problem.

p. 41:

In order to draw out the differences among natural states, we characterize three types: fragile, basic, and mature.

In a fragile natural state, the coalition could break up at any time, and the main goal of leaders is survival. In a basic natural state, there are some more durable institutions of government. In a mature natural state, you start to see some durable private institutions, although access to these is limited to members of the dominant coalition.

Don Boudreaux points to a letter from Congressman Barney Frank that suggests to me that Congressman Frank would be quite comfortable moving the U.S. from an open-access order back to a mature natural state. The intimidation of Bank of America is another example.
p. 45:

The second fundamental feature of the basic natural state is that only organizations with direct connections to the state possess durability...basic natural states do not support a rich civil society because few (or perhaps no) organizations exist that compete with the state.

p. 113:

Because open access orders deliver public goods for all citizens, it is harder for these states to force potential opponents to support the state by threatening to cut off important services if they fail to do so.

My impression is that Montgomery County, Maryland, is in some respects not an open-access order. If the service that you want from the government is a permit to undertake a real estate development project, you probably cannot get that service if you are an active, outspoken Republican. What I foresee in the next decade is the United States as a whole becoming a similar one-party state, in which government favors are so important for the survival of many firms that they find allegiance to the Democratic Party to be an economic necessity.
p. 129:

Incumbents in open access orders have strong incentives to maintain prosperity, and the evidence suggests that failing to do so turns them out of office.

Except, in my view, right now the Democratic Party has some dimensions of slack. First, they can use handouts to "spread the pain," so that people will be satisfied even if the economy performs poorly. Second, they have an advantage among voters who identify with the Democrats on ethnic grounds--they are not going to lose the votes of minorities just because of poor economic performance. Third, they can front-load the benefits and back-load the costs of their policies, because they have been given a free pass by the media elites to run unprecedented peacetime deficits.
p. 145:

The dominant view identifies democracy with electoral competition. We disagree...Open access affords a rich civil society, a free press, and open competition of an opposition, whereas natural states tend to limit each of these...These states use public goods to respond to electoral demands in ways that are more complementary to markets at lower cost than do natural states.

Here, NWW part company with public choice theory and with libertarian idealization of limited government. They see political competition in open access orders as leading government to produce public goods. Political competition, not Constitutional limitation, is the key to restraining rent-seeking.

I could go on, but I think it is fair to say that there is much to chew on in the book. I recommend it highly, in spite of my occasional frustrations over repetition and organization.

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CATEGORIES: Political Economy

COMMENTS (9 to date)
Isegoria writes:

I enjoyed listening to Russ Roberts interview Weingast on Violence, Power and a Theory of Nearly Everything a while back. I recommend the podcast to anyone who isn't already listening to EconTalk.

North, Wallis, and Weingast have formalized something I thought to myself back in high school — or maybe early college. If free-markets are so efficient, why do we see so many guilds (and other monopolies) in pre-modern economies?

It didn't take me very long to come to a realization. The king has plenty of soldiers, but not necessarily a lot of cash. Granting monopolies is virtually free to him and probably easier than collecting taxes.

What intrigues me is the thought that kings and dictators could probably do better for themselves by sticking to a few efficient taxes (e.g. a land-value tax), rather than trying to fiddle with anything and everything, and they could hand out favors by handing out straightforward shares of tax revenue (or "profits" after government expenses), not monopolies on random segments of the economy.

dWj writes:

A lot of people want economic prosperity, but also want (or believe they want) policies that will eliminate long-term economic prosperity. If there were no such divide, a kind of Tiebout mechanism would take care of a lot of problems we face. Instead, people are perfectly happy to move to prosperous areas, vote for long-term destructive policies, and their children or grandchildren can then move along later, like locusts.

david writes:

It is difficult to record the extent to which political power is leveraged to gain economic rent, since such statistics are rarely readily available, and rent is particularly nontransparent.

We do however know the extent to which economic power is leveraged to gain political power - in the form of publicly-available statistics on resources spent on corporate lobbying. These numbers are not encouraging. Perhaps we will have a future where lobbying the Democratic Party is a necessity, and Democratic primaries become fantastically crucial. But we are already in a present where lobbying is necessary: observe that corporations generally hedge their bets and fund both D and R. This doesn't suggest meaningful political competition.

I daresay that given these definitions the United States has never been an open-access order - why lobby if so? The idea and attempted practice of a independent civil service seems to be a distinctly European one.

Prakhar Goel writes:

If this is in your area of interest, might I suggest Pareto's theory of residues captured in his four major volumes on sociology: The Mind and Society: A Treatise on General Sociology.

chipotle writes:

Open-Access Order sounds a little bit like Robert Dahl's classic formulation of Polyarchy.

Thanks for the review.

The timeline is interesting since on my view the first patent system (and the treatment of trade secrets as property rights) also emerged in the mid-19th century in the United States.

Their theory of the open access state fits reasonably well with Posner's vision of "Schumpeterian" democracy.

I wonder where the minimum cutoff for scale is, however. The Venetian Republic, for example, seemed to approximate an open access state during the 15th century.

aez writes:

It's "ad nauseam", for future reference...common mistake, and obviously no detriment to your point, but I thought you'd like to know.

George writes:


One reason Montgomery County is one-party is because it's easy to leave: a Republican resident can move to friendlier Fairfax without having to change jobs or trade down to a smaller house or get a green card or learn a new language. If members of the minority party had nowhere else to go, they'd be more likely to stand and fight.

I imagine Democrats fleeing in the other direction is also a factor.

dWj wrote:

...People are perfectly happy to move to prosperous areas, vote for long-term destructive policies, and their children or grandchildren can then move along later, like locusts.

You wouldn't happen to be from California, would you?

Mencius writes:

I fear NWW could use some serious quality time with W.H. Mallock's Limits of Pure Democracy. I wouldn't be surprised if after reading Mallock, they stop promoting their book and start promoting his. It would certainly be the honorable thing.

Shorter Mallock: the idea of an "open-access order" is a crock. All governments at all times in history have been "limited-access," ie, oligarchical in practice if not form.

Note that this observation has also been made - in the last century alone - by Robert Michels, Gaetano Mosca, Vilfredo Pareto and James Burnham. Moreover, before the last century, the intrinsic concentration of power was a truism on par with the blueness of the sky. So who, exactly, is the reality-based community here?

Sadly, all you're looking at in the post-1800 era, and especially the post-1945 era, is a bureaucratic theocracy - a classic form of "limited-access order." Ie, a caste of logothetes which rules by monopolizing public opinion. The design is as old as Egypt - though it never admits it.

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