Capitalism meets Democracy (or at least government)

Locke envisions governments being formed to protect property.  His examples suggest that these groups form for protection against the people on the other side of the forest or river; but in this day and age what do we mean - Canada?

Yes all nations have standing armies to collectively protect themselves from real or perceived threats from other nations. However, on a day-to-day basis threats to our property are much nearer to home. There is, of course, the threat of common crimes such as assault and robbery for which we trade freedom to (personal retribution) for freedom from (involving the police and the judicial system). However, threats to property which are much more ubiquitous arise from the division of labor. Let us go back to Adam Smith’s bow and arrow maker to see how this might originate.

Let us say that the bow and arrow maker agrees to provide a certain number of arrows to the hunter in return for a specific quantity of venison. Let us then imagine that the meat that the hunter provides is mostly gristle or rancid, or simply less than promised. Or we can imagine on the other hand that the arrows weren’t straight or the heads weren’t sharp, or the feathers fell off.  In either case one or the other lost value of their property in the exchange. Initially, they might resolve the dispute between themselves. However, and especially if the dispute were settled through violence, this throws the individual back to the state where the “enjoyment of it (his freedom) is very uncertain, and constantly exposed to the invasion of others” who happen to be the ones with whom he is most closely associated. In addition to being bad for those involved this defeats the purpose of the group which is to allow the individual to enjoy his freedom from both the threat of violence and the capriciousness of the solution (Might makes right regardless of facts.) Furthermore, since this threatens group cohesiveness it is bad for the integrity of the group and makes it more vulnerable to threats from outside.

One can imagine then that very early on the group recognized a higher authority –tribal elders or a chief – to arbitrate such disagreements and render a decision that the group accepted as an acceptable resolution of the dispute.  Whether such individuals or tribunals rendered fair judgments most, some, or none of the time is irrelevant. These primitive institutions did their job if they minimized intragroup violence and their pronouncements were accepted by the group as binding.

This is my speculation on government’s first step into (interference in) the market place. I acknowledge that neither Smith, Locke, nor I have any appreciable factual knowledge of the governance of pre-historic man. That said throughout history we have evidence of markets that function as Smith said, governments that function with the purpose that Locke said, and the interaction between markets and government that function as I have speculated and that is what we have today. We choose buy (vs. make) and trade our property (time and money) for what we expect is of equal value to us. We depend on government to give us piece of mind (freedom from) that that trade lives up to our expectations.

In my next entry I will bring these ideas into the 21^st century to see how markets, government, and their interaction affect us today.