Handbook on Contemporary Austrian Economics

How much order can spontaneous order create 137
that government-designed institutions facilitate. For instance, we have no
examples of spontaneously ordered societies that generated volumes of
cooperation sufficient to create the levels of wealth we observe in places
where political authorities centrally designed meta-rules.
This chapter investigates these issues and seeks to shed light on the
question of how much order spontaneous order can create. To do this,
I consider three separate "classes" of spontaneous order emergence and
operation. First, I consider the "easy case," spontaneous order in the
"shadow of the state." Next, I consider the "harder case," spontaneous
order over meta-rules themselves where government is absent. Finally, I
consider the "hardest case," the possibility of a spontaneous order capable
of generating cooperation that equals or surpasses the levels we observe in
societies that rely on government for this purpose.
I find that spontaneous order is possible in the "easy" and "hard" cases.
The verdict is still out on the "hardest" case. But there is reason to be
optimistic about spontaneous order even here. Further, as I discuss below,
while it is important for analyses of spontaneous order to go beyond
mere "existence proofs" - evidence that some spontaneous institutional
arrangements will emerge without government - it is equally important
to get the benchmark right for assessing spontaneous order's ability
to produce cooperation relative to government. Correct benchmarking
makes the possibility of the "spontaneous order unicorn" - the privatelyordered
society that is as, or more, productive than state-governed society
- not so unimaginable after all.
10.2 The easy case: spontaneous order in the shadow of government
Even where government exists and functions well, the cost and imperfection
of state enforcement creates ample space for spontaneous order. One
of the most prevalent examples of this is extra-legal institutions of contract
enforcement, such as reputation. Suing Jimmy B.'s Burger Shack because
it gave you a small drink instead of the large drink you ordered and paid
for, for example, is prohibitively costly. Even if you win your lawsuit
against Jimmy B. for perpetrating this fraud, you will likely be worse
off than if you had not bothered suing him in the first place. The simple
time-cost of the procedure outweighs what you can hope to recover for
the average meal. Situations like this create latitude for post-contractual
opportunism on the part of exchange partners despite state enforcement's
existence. If individuals cannot prevent such opportunism, they won't
enter exchange agreements with others and the market shrinks along
with individuals' ability to capture the gains from cooperating. Contracts
with a credit component to them create another kind of post-contractual
opportunism. Here, since payment is separated from provision, the debtor