Search results

The problem of controlling the use of force and those who are best at wielding it is foundational to human collective life. For most of history, a social order that was relatively "closed" has seemed the most natural way to manage this problem. But over the past century or two, a transition from closed- to open-access orders has led to the emergence of societies with widespread political participation, the use of elections to select governments, constitutional arrangements to limit and define the powers of government, and unbiased application of the rule of law.

For most of history, a closed social order has seemed the most "natural" way to manage the problem of controlling the use of force. The rise of modern democracy can be understood only in the context of the transition to open-access orders.

A good reputation can be an effective bond for honest behavior in a community of traders if members of the community know how others have behaved in the past – even if any particular pair of traders meets only infrequently. In a large community, it would be impossibly costly for traders to be perfectly informed about each other's behavior, but there exist institutions that can restore the effectiveness of a reputation system using much less extensive information. The system of judges used to enforce commercial law before the rise of the state was such an institution, and it successfully encouraged merchants (1) to behave honestly, (2) to impose sanctions on violators, (3) to become adequately informed about how others had behaved, (4) to provide evidence against violators of the code, and (5) to pay any judgments assessed against them, even though each of these behaviors might be personally costly.