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A Tale of Two Markets and the Role of Prosperous Market-Augmenting Governments

Author

Listed:
  • Sanghack Lee

    (Department of International Commerce, Kookmin University, 77 Jeongneung-ro, Seongbuk-gu, Seoul, 02707, KOREA)

Abstract

This paper aims to examine the role of market-augmenting government and the two general conditions for achieving economic prosperity. Markets exist ubiquitously, but the markets in rich countries are substantially different from those in poor countries. In rich countries, the markets are the main source of prosperity and thus are called prosperous markets. For a country to achieve rapid economic growth, the country should obtain gains not only from the mutually advantageous trades, but also from the rights-intensive, property rights-intensive or contract rightsintensive productions. The mutually advantageous trades and individual rights-intensive productions take place both in the government-contrived markets and in the rich countries. The countries having a market-augmenting government coined by Olson (2000) tend to grow most rapidly. A market-augmenting government should not only be ¡®strong¡¯ enough to guarantee secure and well-defined property rights and contract enforcement rights to the people, but also be ¡®inhibited¡¯ so as not to deprive or damage individual rights. The two general conditions to achieve economic prosperity are secure and well-defined individual rights, and the absence of any predation. These conditions are realized in countries with market-augmenting governments and rightsrespecting democracies.

Suggested Citation

  • Sanghack Lee, 2016. "A Tale of Two Markets and the Role of Prosperous Market-Augmenting Governments," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 81-92, November.
    • Handle: RePEc:bap:journl:160406
    Note: We would like to thank anonymous referees for their useful comments and suggestions. Remaining errors are all ours.
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    References listed on IDEAS

    as
    1. Martin C. McGuire & Mancur Olson, 1998. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," International Economic Association Series, in: Silvio Borner & Martin Paldam (ed.), The Political Dimension of Economic Growth, chapter 3, pages 38-73, Palgrave Macmillan.
    2. Clague, Christopher & Keefer, Philip & Knack, Stephen & Olson, Mancur, 1996. "Property and Contract Rights in Autocracies and Democracies," Journal of Economic Growth, Springer, vol. 1(2), pages 243-276, June.
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    More about this item

    Keywords

    Self-enforcing or ubiquitous market; Prosperous market; Government-contrived market; Market-augmenting government;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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