ABSTRACT
Much of our thinking about public policy and the economy has been shaped by a simple contrast between the market and the state, as noted in Chapter 1. Yet, it is difficult to conceive of large, functioning markets absent state institutions. They are central to the creation of functional property rights. Moreover, key actors in the economy (corporations, labor unions, financial institutions) and the permissible relationships between them, are a product of public policy. Laws shape economic development by favoring certain methods of coordination and control while rendering others illegal. The key lesson thus far is that simple lines of demarcation between the market and the state do not provide a descriptively accurate or analytically useful means of understanding the political economy. Rather than comprising two potentially opposing forces, the market and the state are institutionally intertwined.
