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<blockquote data-quote="takethepoints" data-source="post: 326209" data-attributes="member: 265"><p>Not quite. Hayek assumed that markets would produce "spontaneous order", but only within a set of formal rules that would protect market mechanisms. This, indeed, is what most people (Douglas North, for instance) who take an institutional view of economics assume as well. That's why they make such a distinction between a world based on traditional and religious constraints and one based on formal rules.</p><p></p><p><em>But</em> … it turns out that they are wrong. Informal institutions continue and thrive in modern societies, so much so that formal rules have evolved to accommodate them (tax rules for religious organizations, for instance). Also, however, informal institutions can be created out of whole cloth by general agreement among participants (the school example I gave before) or by elites that are interested in getting results that formal rules forbid (the use of torture in the War on Terror is a good example). In both cases, rules are bent and purposely diluted. And when the informal pattern is discovered, all involved can tsk-tsk about it, say they had no idea this was going on, and enforce the formal framework they worked around. And blame the poor stiffs who did what the people on top said they should, of course.</p><p></p><p>Well, enough.</p></blockquote><p></p>
[QUOTE="takethepoints, post: 326209, member: 265"] Not quite. Hayek assumed that markets would produce "spontaneous order", but only within a set of formal rules that would protect market mechanisms. This, indeed, is what most people (Douglas North, for instance) who take an institutional view of economics assume as well. That's why they make such a distinction between a world based on traditional and religious constraints and one based on formal rules. [I]But[/I] … it turns out that they are wrong. Informal institutions continue and thrive in modern societies, so much so that formal rules have evolved to accommodate them (tax rules for religious organizations, for instance). Also, however, informal institutions can be created out of whole cloth by general agreement among participants (the school example I gave before) or by elites that are interested in getting results that formal rules forbid (the use of torture in the War on Terror is a good example). In both cases, rules are bent and purposely diluted. And when the informal pattern is discovered, all involved can tsk-tsk about it, say they had no idea this was going on, and enforce the formal framework they worked around. And blame the poor stiffs who did what the people on top said they should, of course. Well, enough. [/QUOTE]
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