ECONOMISING ON GOVERNMENT IN ECONOMIC DEVELOPMENT

I take as my starting point the words of Jesus as recorded in the New Testament: “Render therefore unto Caesar the things which are Caesar’s; and unto God the things that are God’s ” (Matthew 22:21). A careful exploration of the wellsprings of modern economic development leads to a third admonition: render unto the market that which is the market’s. That which is Caesar’s is the use of State power to enforce behaviour that private citizens would not choose of their own accord but which is necessary for economic development in the whole society. It is the use of State power to internalise external costs and benefits of individual decisions. Whatever the private gains from the corrupt use of a public office for private gain, or from theft, or from breach of a contract to deliver to another some goods or services, or from the appropriation of some property that another owns, or from the application of violence in ones private relations with others, these activities impose costs on others that exceed in quantum the private benefit. The removal of these external costs through the exercise of State power leads to an expansion of utility in society as a whole. In addition, whatever the private advantages in enjoying benefits of collectivel