http://www.cato-unbound.org/2007/08/15/dani-rodrik/scaling-up-international-trade-and-demand-for-government/ Big Ideas for a Better World Fri, 5 Sep 2008 23:39:14 +0000 http://wordpress.org/?v=2.3.3 http://www.cato-unbound.org/2007/08/15/dani-rodrik/scaling-up-international-trade-and-demand-for-government/#comment-97832 Why does this exchange require a solution to scaling up self-enforcing agreements? « ZenPolitics Mon, 20 Aug 2007 20:21:09 +0000 http://www.cato-unbound.org/2007/08/15/dani-rodrik/scaling-up-international-trade-and-demand-for-government/#comment-97832 [...] I want to revisit the exchange being had by Peter Leeson and Dani Rodrik regarding the scale-up of self-enforcing agreements. The contention seems to be that an anarchic system relies on self-enforcing agreements, and that as you scale up such economies, self-enforcing agreements break down. Therefore, self-enforcing agreements (and efficient systems of anarchy in general) only operate effectively in a small scale that may be geographically limited or involve a specific group or community where individuals know one another. Specifically, one of the problems cited is signaling–essentially in a small or closed group it is possible to communicate to the others who is trustworthy and who is not, thus creating disincentive for people to try to circumvent the rules of fair trade and dealing. How can that work on a large scale? [...] […] I want to revisit the exchange being had by Peter Leeson and Dani Rodrik regarding the scale-up of self-enforcing agreements. The contention seems to be that an anarchic system relies on self-enforcing agreements, and that as you scale up such economies, self-enforcing agreements break down. Therefore, self-enforcing agreements (and efficient systems of anarchy in general) only operate effectively in a small scale that may be geographically limited or involve a specific group or community where individuals know one another. Specifically, one of the problems cited is signaling–essentially in a small or closed group it is possible to communicate to the others who is trustworthy and who is not, thus creating disincentive for people to try to circumvent the rules of fair trade and dealing. How can that work on a large scale? […]

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