Tuesday, November 6, 2012

When law meets economics there are many varied theories about how one's government should proceed, ranging from communistic to capitalist, libertarian to authoritarian.

My argument is based on principle. I think that the most efficient and productive society can be developed when individuals are allowed to choose to do with themselves and their property as they choose, provided they do not harm another person. It doesn't matter how one one person will harm another or how that other person will harm the first. What matters is that neither person actively harm the other.

In Ronald Coase's example of the doctor and confectioner  the confectioner has begun actively harming the doctor through noise pollution. It doesn't matter that the confectioner will suffer because of the regulation imposed upon him, he is actively causing harm to another individual and therefore is at fault, regardless of the impact this will have on either the doctor or the confectioner.

When laws are formed to protect people from actively being harmed, the society as a whole will begin to flourish, as individuals will have more respect for the law and the government imposing those laws. Laws that favor one individual over another based on an economic perspective will always breed malcontents and will lose favor for the government with the people, ultimately reducing the growth of the society and its government.

Essentially, the most efficient economies develop not when laws are developed to grow economies but rather when laws are fair and protect individuals.

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