Chapter 4: Beyond Law: The Institutionalized Ethics of Liberal Order
* INTRODUCTION I have always considered myself as working within the program laid out by Adam Smith, with the aim of understanding and interpreting the operation of a market order within the structure of the appropriately defined ‘laws and institutions,’ with the latter often being taken to mean the legal framework or structure that defines and enforces private property rights and voluntary contracts. I have, both explicitly and implicitly, been critical of those who have predicted the emergence and efficacy of markets independent of the presence of the Smithean parameters. For the most part, however, my emphasis has been on the necessary characteristics of the legal structure itself, on the ‘constitution,’ broadly conceived, and in particular on the limits placed on politically motivated intrusions with persons’ ‘natural liberties,’ again a familiar Adam Smith term. Many of the overly optimistic predictions about the transition from socialist–collectivist regimes to viable liberal societies in central and eastern Europe were made in disregard of the Smithean requirement that the necessary ‘laws and institutions’ be in place before markets can begin to function satisfactorily. Retrospectively, we now know that those outside commentators, like Henry Manne, who in 1989–90 put their stress on the primacy of implanting the rule of law, were much more nearly on target than those who concentrated their emphasis on the relaxation of collectivist controls. It was, and is, of course, necessary that the complex bureaucratic apparatus of state control be dismantled. In its place, however, this apparatus...
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