ABSTRACT
The libertarian anarchists who dream of markets without states are romantic fools who have read neither Hobbes nor history. Reading history, however conducive to wisdom and understanding, is a notoriously inconclusive way of reaching specific conclusions about such vast, amorphous and diffuse features of the past as markets, states, and their interdependence. The dependence goes from the legal and political to the economic: law and its enforcement are prior to market exchange. The standard one is that property and contract prevail because the state enforces the laws that secure them. James Buchanan, in implicitly making the very existence of crucial institutions depend on the state as last-resort enforcer, claims support by both Hobbes and history: "Institutions matter. A corollary of the increasing returns thesis is that the state, using the threat of violence, reduces transactions costs what they would be under private contract enforcement.
