The Legal Foundations of Free Markets.

• Author: Morriss, Andrew P.
• Position: Book review

The Legal Foundations of Free Markets

Edited by Stcphcn F. Copp

London: Institute of Economic Affairs, 2008.

Pp. 255. $34.00 paperback.

What does it take to have a "free" market? Do we need property and contract law? What about antitrust law? Are corporations, which limit their shareholders' liability toward third parties, consistent with a free market? Are they necessary? The Legal Foundations of Free Markets, a fascinating collection of nine substantive chapters and an introduction that thoroughly canvases the issues, by some of the brightest legal thinkers who take markets seriously, raises such questions and provides careful, nuanced answers that are likely to stir debate.

The first five chapters tackle the subject from first principles, with George Mason University economist Peter Leeson asking, "Do markets need government?"; the Acton Institute's Samuel Gregg exploring the natural-law basis for free markets; Institute of Economic Affairs fellow Cento Veljanovski examining the connection between the common law and wealth; University of Manchester professor Anthony Ogus tackling the problem of fitting regulation into a theory of markets; and University of Buckingham philosopher Norman Barry focusing on economic rights, especially the pernicious effect of treating these rights as less important than civil and political rights in modern legal systems. These chapters will surprise many people (at least, many people who don't read The Independent Review). Starting with first principles upends the current, generally accepted view that at least a night-watchman state, perhaps even a regulatory state, is necessary to establish the "rules of the game" for market activity, that an unholy combination of Adam Smith and John D. Rockefeller invented free markets, and that hundred-page statutes are consistent with a productive economy.

Leeson, who has written definitive works on both anarchy and pirates and so has made economics seem much more interesting than most people imagine, carefully reasons through the necessary conditions for market activity, drawing on examples from contemporary anarchies, such as Somalia, and from history. He concludes that markets produce institutions that serve the key roles of enforcing contracts, that even stateless anarchies have significant amounts of economic activity, and that crime does not pose a special problem for markets under anarchy. Not every reader, not even every libertarian reader, will agree with...