Caplan, Bryan and Stringham, Edward (2003): Networks, law, and the paradox of cooperation. Published in: Review of Austrian Economics , Vol. 16, No. 4 (December 2003): pp. 309-326.
Download (77kB) | Preview
There is a tension between libertarians’ optimism about private supply of public goods and skepticism of the viability of voluntary collusion (Cowen 1992, Cowen and Sutter 1999). Playing off this asymmetry, Cowen (1992) advances the novel argument that the “free market in defense services” favored by anarcho-capitalists is a network industry where collusion is especially feasible. The current article dissolves Cowen’s asymmetry, showing that he fails to distinguish between self-enforcing and non-self-enforcing interaction. Case study evidence on network behavior before and after antitrust supports our analysis. Furthermore, libertarians’ joint beliefs on public goods and collusion are, contrary to Cowen and Sutter (1999), theoretically defensible.
|Item Type:||MPRA Paper|
|Original Title:||Networks, law, and the paradox of cooperation|
|Keywords:||networks; anarcho-Capitalism; collusion|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L15 - Information and Product Quality ; Standardization and Compatibility
|Depositing User:||Edward Peter Stringham|
|Date Deposited:||27. Oct 2010 21:15|
|Last Modified:||06. Mar 2015 06:37|
Allen, P. (2000) “Prepared Testimony ofMr. Paul Allen.” Senate Banking Committee, Subcommittee on Financial Institutions, Hearing on Competition and Innovation in the Credit Card Industry at the Consumer and Network Level, May 25, 2000.
Banner, S. (1998) “The Origin of the New York Stock Exchange, 1791–1860.” Journal of Legal Studies, 27: 113–140.
Benson, B. (1990) The Enterprise of Law. San Francisco: Pacific Research Institute for Public Policy.
Benson, B. (1993) “The Impetus for Recognizing Private Property and Adopting Ethical Behavior in a Market Economy: Natural Law, Government Law, or Evolving Self-Interest.” Review of Austrian Economics, 6: 43–80.
Benson, B. (1998) To Serve and Protect: Privatization and Community in Criminal Justice. New York: New York University Press.
Bernheim, D. and Whinston, M. (1985) “Common Marketing Agencies as a Device for Facilitating Collusion.” Rand Journal of Economics, 16: 269–281.
Boal,W. and Ransom, M. (1997) “Monopsony in the Labor Market.” Journal of Economic Literature, 35: 86–112.
Calomiris, C. and Kahn, C. (1991) “The Role of Demandable Debt in Structuring Optimal Banking Arrangements.” American Economic Review, 81: 497–513.
Calomiris, C. (1990) “Is Deposit Insurance Necessary? A Historical Perspective.” Journal of Economic History, 50: 283–295.
Cannon, J. G. (1910) Clearing Houses. Washington, Govt. Print. Off.
Carlton, D. and Frankel, A. (1995a) “The Antitrust Economics of Payment Card Networks.” Antitrust Law Journal, 63: 643–668.
Carlton, D. and Frankel, A. (1995b) “The Antitrust Economics of Payment Card Networks: Reply to Evans and Schmalensee Comment.” Antitrust Law Journal, 63: 903–915.
Coate, S. and Loury, G. (1993) “Will Affirmative-Action Policies Eliminate Negative Stereotypes?” American Economic Review, 83: 1220–1240.
Cowen, T. (1992) “Law as a Public Good: The Economics of Anarchy.” Economics and Philosophy, 8: 249–267.
Cowen, T. (1994) “Rejoinder to David Friedman on the Economics of Anarchy.” Economics and Philosophy, 10: 329–332.
Cowen, T. and Sutter, D. (1999) “The Costs of Cooperation.” The Review of Austrian Economics, 12: 161–173.
Dewing, A. (1914) Corporate Promotions and Reorganizations. Cambridge, MA: Harvard University Press.
Dowd, K. (1994) “Competitive Banking, Bankers’ Clubs, and Bank Regulation.” Journal of Money, Credit and Banking, 26: 289–308.
Economides, N. (1995) “Commentary on ‘Antitrust Economics of Credit Card Networks’.” Federal Reserve Bank of St. Louis Review, Nov.–Dec. 1995: 60–63.
Evans, D. and Schmalensee, R. (1995) “Economic Aspects of Payment Card Systems and Antitrust Policy Toward Joint Ventures.” Antitrust Law Journal, 63: 861–901.
Evans, D. and Schmalensee, R. (1999) Paying with Plastic: The Digital Revolution in Buying and Borrowing. Cambridge, MA: MIT Press.
Fort, R. and Quirk, J. (1995) “Cross-Subsidization, Incentives, and Outcomes in Professional Sports Leagues.” Journal of Economic Literature, 33: 1265–1299.
Friedman, D. (1989) The Machinery of Freedom, Guide to Radical Capitalism, 2nd ed. La Salle, IL: Open Court.
Friedman, D. (1994) “Law as a Private Good: A Response to Tyler Cowen on the Economics of Anarchy.” Economics and Philosophy, 10: 319–327.
Gabel, D. (1994) “Competition in a Network Industry: The Telephone Industry, 1894–1910.” Journal of Economic History, 54: 543–572.
Geddes, R. (2000) “Public Utilities.” In: Encyclopedia of Law and Economics,Vol. III. The Regulation of Contracts. Cheltenham, UK: Edward Elgar, pp. 1162–1205.
Goodhart, C. (1988) The Evolution of Central Banks. Cambridge, MA: MIT Press.
Gorton, G. (1985) “Clearinghouses and the Origin of Central Banking in the United States.” Journal of Economic History, 45: 277–283.
Gorton, G. and Mullineaux, D. (1987) “The Joint Production of Confidence: Endogenous Regulation and Nineteenth Century Commercial-Bank Clearinghouses.” Journal of Money, Credit and Banking, 19: 457–468.
Greif, A. (1993) “Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders’ Coalition.” American Economic Review, 83: 525–548.
Greif, A., Milgrom, P., and Weingast, B. R. (1994) “Coordination, Commitment, and Enforcement: The Case of the Merchant Guild.” Journal of Political Economy, 102: 745–776.
Hanft, N. (2000) “PreparedTestimony ofMr. Noah Hanft.” Senate Banking Committee, Subcommittee on Financial Institutions, Hearing on Competition and Innovation in the Credit Card Industry at the Consumer and Network Level, May 25, 2000.
Hausman, J., Leonard, G., and Tirole, J. (1999) “The Impact of Duality on Productive Efficiency and Innovation.” Working paper, MIT.
Hock, D. (1999) Birth of the Chaordic Age. San Francisco: Berrett-Koehler Pub.
Katz, M. and Shapiro, C. (1985) “Network Externalities, Competition, and Compatibility.” American Economic Review, 75: 424–440.
Katz, M. and Shapiro, C. (1994) “Systems Competition and Network Effects.” Journal of Economic Perspectives, 8: 93–115.
Klein, D. (1990) “The Voluntary Provision of Public Goods? The Turnpike Companies of Early America.” Economic Inquiry, 28: 788–812.
Lal, D. (1997) “From Planning to Regulation: Toward a New Dirigisme?” The Cato Journal, 17: 211–227.
Libecap, G. and Wiggins, S. (1984) “Contractual Responses to the Common Pool: Prorationing of Crude Oil Production.” American Economic Review, 74: 87–98.
Liebowitz, S. J. and Margolis, S. (1994) “Network Externality: An Uncommon Tragedy.” Journal of Economic Perspectives, 8: 133–150.
Liebowitz, S. J. and Margolis, S. (1995) “Are Network Externalities a New Source of Market Failure?” Research in Law and Economics, 17: 1–22.
Liebowitz, S. J. and Margolis, S. (1998) “Network Effects and Externalities.” In: The New Palgrave Dictionary of Economics and the Law, pp. 671–675. London: MacMillan.
Mahoney, P. (1997) “The Exchange as Regulator.” Virginia Law Review, 83: 1453–1500.
McChesney, F. and Shughart, W. (1995) The Causes and Consequences of Antitrust: The Public-Choice Perspective. Chicago: University of Chicago Press.
National Collegiate Athletic Association (2000) NCAA Division I Manual 2000–2001.Overland Park, KS: NCAA.
National Collegiate Athletic Association v. Board of Regents of the University of Oklahoma et al. (1984) 468 U.S. 85.
Neale, W. (1964) “The Peculiar Economics of Professional Sports.” Quarterly Journal of Economics, 78: 1–14.
Noll, R. (Ed.) (1974) Government and the Sports Business. Washington, DC: The Brookings Institution.
Rochet, J. C. and Tirole, J. (2000) “Cooperation among Competitors: The Economics of Payment Card Associations.” Working paper, IDEI, Toulouse.
Rosen, S. (1981) “The Economics of Superstars.” American Economic Review, 71: 845–858.
Rothbard, M. N. (1978) For a New Liberty: The Libertarian Manifesto. NY: Libertarian Review Foundation.
Salop, S. and White, L. J. (1991) “Policy Watch: Antitrust Goes to College.” Journal of Economic Perspectives, 5: 193–202.
Schmidtz, D. (1991) The Limits of Government: An Essay on the Public Goods Argument. Boulder: Westview Press.
Smith, V. L. (1980) “Experiments with a Decentralized Mechanism for Public Good Decisions.” American Economic Review, 70: 584–599.
Sowell, T. (1994) Race and Culture. NY: Basic Books. Sprague, O. M. W. (1910/1977) History of Crisis Under the National Banking System. Fairfield, NJ: Augustus M Kelly Publishers.
Stringham, E. (1999) “Market Chosen Law.” Journal of Libertarian Studies, 14: 53–77.
Stringham, E. (2002) “The Emergence of the London Stock Exchange as a Self-Policing Club.” Journal of Private Enterprise, 17: 1–19.
Stringham, E. (2003) “The Extralegal Development of Securities Trading in Seventeenth Century Amsterdam.” Quarterly Review of Economics and Finance, 43: 321–344.
Sutter, D. (1995) “Asymmetric Power Relations and Cooperation in Anarchy.” Southern Economic Journal, 61: 602–613.
Telser, L. (1980) “A Theory of Self-Enforcing Agreements.” Journal of Business, 53: 27–44.
Timberlake, R. (1984) “The Central Banking Role of Clearinghouse Associations.” Journal of Money, Credit and Banking, 16: 1–15.
Tullock, G. (1974) The Social Dilemma: The Economics of War and Revolution. Blacksburg, VA: University Publications.
Tullock, G. (1981) “The Rhetoric and Reality of Redistribution.” Southern Economic Journal, 47: 895–907.
Veitch, J. (1986) “Repudiations and Confiscations by the Medieval State.” Journal of Economic History, 46: 31–36.
Zywicki, T. (2000) “The Economics of Credit Cards.” Chapman Law Review, 3: 79–172.