Violence and Social Orders, by North, Weingast, and Wallis. A major theme is that there are natural states, or limited-access orders, in which only a minority of the population enjoys political rights and economic opportunity. One quote:
One of the principal institutional issues that emerged in this chapter concerned the problems of constraining personality: putting the king under the law. At the level of societies, the head of the dominant coalition–whether the pope or the Catholic Church, the emperor of Rome, or the king of a European state–reflects the realities of these natural states: the ruler is often above the law. This allows him or her to adjust the rules, privileges, rights, and laws to suit the needs of the coalition as the fortunes of various elites rise and fall. Elites gaining power must be granted more privileges and rents while those losing power also lose privileges and rents. The rules is not free to make these decisions at his discretion, but must instead attempt to maintain a coalition to support the natural state. Failure to do so risks coups, civil war, and other forms of disorder.
In an open-access order, where essentially all adults have political rights and economic opportunity, the challenge of bringing the head of state under the law has presumably been met. Sometimes, I am not so sure.
Also, consider another quote:
Party competition forces parties to compromise and to moderate interest group and constituency demands. Rent-creation cannot be the primary product of party competition in open-access orders. . .Because parties need to gain the support of many interests, they must temper the (rent-creating) demands of each, lest the associated extreme positions hinder the party’s electoral prospects.
If the authors are not careful, they will seem to have explained why the sugar lobby and the real estate lobby are ineffective in the U.S. and why the teachers’ union is ineffective in Maryland. They will have explained why we have such a simple tax code, and why it is so easy for unlicensed health care providers and unaccredited schools to gain traction.
. . .the interests active on any issue are endogenous. If a group attempts to extract too much, then other groups who are not normally active on an issue are likely to begin paying attention and become active. . .The endogenous approach suggests that a few open access order markets might be cartelized and protected, such as agriculture, and certain markets regulated to produce rents, such as airlines in mid-century United States. However, these markets are the exception, not the rule.
They wish to claim that rent-preservation is the essence of limited-access orders, but it is incidental and held in check under open-access orders. Perhaps they could cite Uber’s so-far successful breakthrough into the transportation market as an example in which the open-access order was able to activate enough support for Uber to prevent its destruction by incumbent taxi companies.
However, reading these passages, I found myself inclined to disagree with the authors. I tend to give more credit to the power of interest groups and less credit to the ability of the open-access order to confine rent-seeking. I think of the sugar lobby, the housing lobby, the teachers’ union in Maryland, occupational licensing in health care, . . .But to the authors’ point, the size of these rents probably is dwarfed by the size of entitlements, which are policies directed at the broader public. And yes, they will make a frontal assault on the Olson-Downs view that special interests always win.