Arrunada Seminar: John Nye – Formalization and “Optimal” Regulation
| John Nye |
Formalization and “Optimal” Regulation
Benito’s work on titling and formalization seems to serve as an excellent illustration of the problem of “optimal” regulation. Much of the debate about state vs. market presupposes a clear-cut distinction between private and public spheres. But as Benito’s complex discussion of the evolution of formalization and the choices involved in selecting appropriate titling or registration systems shows, the creation of good institutions that protect and enhance property often involve conflicts between different levels of regulatory power (local vs. national) and conflicts between well-functioning but non-scaleable local norms and more cumbersome but universally applicable formal rules. What are the advantages of systems that allow at least some functioning property arrangements in developing societies but which constrain the creation of more effective systems as the nation grows? Do central systems that work closer to the ideal and minimize transactions cost presuppose too much of the state capacity that is often lacking in many nations? Does a well-functioning central system of registration enhance state capacity with greater use or does it encourage unwanted Leviathan by transferring too much power to the State? Consider a country like the People’s Republic of China that did not even have formal private property till a few years ago: Should the state be using its period of authoritarian powers to impose new and theoretically “sensible” rules that might be easier to propose now than later or should it tread lightly and experiment with varieties of local arrangements in the hope of finding which sets of rules work best in a Chinese context, while running the risk that such arrangements may congeal with success and become difficult to reverse?
I’m sure the specific issues of titling, registration, and formalization that Benito discusses will be well treated by those with more specific expertise in these areas. But I also hope we will see some commentary on these broader issues of evolutionary problems in the construction of liberal states.
John V.C. Nye
George Mason University and Higher School of Economics, Moscow