"Building on Rose's model, I've recently written a paper attempting to determine the importance of state-provided contract enforcement for international trade. I find that state enforcement has a small, positive effect on trade--but not the impressive impact suggested by the conventional wisdom that state enforcement is critical for trade to flourish.
The work of several Austrian economists provides a potential explanation for this result. Following Menger, Austrians such as Mises and Hayek view understanding spontaneously emergent institutions one of the critical tasks of economics. Where there are sizable gains from trade, individuals find inventive ways of overcoming obstacles that stand in the way of realizing them. Out of this, in the international arena, emerged private arbitration, private international commercial law, and customs for dealing with disreputable traders. These spontaneously emerged private institutions are ultimately responsible for the boom in international trade--not government."
Law can be an emergent economic activity, and not just the work of legislatures.
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