> I am trying to think about cultures that don't have the economic > institutions that Western countries have. For example, if the people > of one nation voluntarily adopted Islamic law and did not charge > interest, voluntarily, would that be a market? Basically, I want > to get beyond "voluntary interaction" and try to think about > the institutions you need in order to have Western style markets. > So if people abolish interest rates, they're abolishing one of the > key market mechanisms. Although it's voluntary, it's certainly missing > something important.
The question is getting more difficult. Clearly, economic institutions in Germany, France, and the U.S. are all different. I think the question being asked is what essential features do they have in common that distinguishes them from, say, Russia or China. I don't know how to answer it, but one way to begin would be to ask why you focus on Western markets. Are you picking them because they are wealthier? If so, then you are asking what features of markets make people wealthier. Reuven Brenner has argued that active capital markets make an enormous difference. There is work out there on the importance of corporate governance and legal regulation of stock exchanges. The important point, at least it seems to me, is that a whole list could be drawn up of things that are different, but whether they are "key" is a difficult empirical question. Each one is a counter-factual: how wealthy would people be in the absence of the mechanism. Bill Sjostrom +++++++++++++ William Sjostrom Senior Lecturer Department of Economics National University of Ireland, Cork Cork, Ireland +353-21-490-2091 (work) +353-21-427-3920 (fax) +353-21-463-4056 (home) [EMAIL PROTECTED] [EMAIL PROTECTED] www.ucc.ie/~sjostrom/
