ABSTRACT
The prospects for beneficial state intervention become even more dismal when we look at the incentives faced by bureaucrats. From this starting point, the focus is on the incentives facing actors in the political arena with an appreciation for how these incentives differ from those within the marketplace. The state is plagued by two pathologies: the knowledge problem and the power problem. A system of private governance provides a viable solution to both the knowledge problem and the power problem. When governance is provided by voluntary associations grounded in private property rights, it is embedded within a market. Proponents of these and other roles for the state tend to assume that the state’s taking on a task guarantees that it will achieve the desired end. Economics is the science of human action. Economists study how individuals make decisions about alternative uses of scarce resources.
