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Laissez‐faire and the institutions of the free market
Author(s) -
Steele G. R.
Publication year - 1999
Publication title -
economic affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.24
H-Index - 18
eISSN - 1468-0270
pISSN - 0265-0665
DOI - 10.1111/1468-0270.00174
Subject(s) - laissez faire , enforcement , free market , capitalism , competence (human resources) , market economy , function (biology) , economics , state (computer science) , business , law and economics , law , political science , management , politics , algorithm , evolutionary biology , computer science , biology
The absence of an adequate institutional structure explains why entrepreneurial capitalism did not automatically follow the collapse of central planning in the 1990s. It is a necessary function of a liberal state to provide a framework for the enforcement of private contractual terms. Beyond that basic need, other regulatory structures tend to emerge spontaneously through the force of mutual advantage and the test of social competence. In particular, institutions such as banking, the law, accountancy, insurance etc. exist to minimise the transactions costs which are inherent in a market economy.