Friday, July 18, 2008

Order! Order whose? By Chandra

When I read the article OURVIEW yesterday livemint news paper it sited quote from Nobel winning economist, it read “Nobel economist Douglass North has divided human societies into two categories. First, “limited access orders” which create orders by using the political system to limit economic participation, a process that creates excess profits (or what economists call rents). These rents are used to impose political stability and limit violence. Second, “open access orders” which maintain order by competition rather than rent seeking”.

Apparently, it shows that the coercion is the former system and the F A Hayek musings of spontaneous order is the later one where individuals are the orders and decision makers.

Luckily I have North book (Understanding the Process of Economic Change) in front of me, when I write this. When I saw this book first time in 2006 I come crossed two interesting lines in the book. They are as follow:

“Uncertainty has a long history in economic literature” p.13

“The development of well specified property rights, for example, will make the overall environment more predicable but will increase uncertainty for those who traditionally have used the land in question without having formal title. Hence an essential question we must ask is, who makes the rules and for whom and what are their objectives”. He went on to say “individuals are the decision makers”…. “and market has the lowest production and transition costs attainable” p.15.

This book is everyone must read book!

In fact the 1st Chapter of the book is available in online go ahead and muse what change he premise.

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