Efficiency, Opportunism and Pious Lies

Abstract

Most social institutions are supposed to be relatively benign, so that if they did not exist, rational human beings would find it worthwhile to create them. It is comforting to believe that we have the social institutions we wish to have, and we wish to have them because they enhance the common good. The article claims that this belief is in some important cases either a self-delusion or a pious lie. The classic example is the state. We are taught that since it is necessary for efficient social coexistence, it should be regarded as if it were the result of a social contract we have voluntarily entered into. The law-and-economics school generalizes this type of approach in explaining customs and law. Customs and laws evolve in response to needs. They are what they are because they efficiently serve some purpose. Certain primitive customs are rationalized in this way. The article claims that some of these rationalizations are grossly implausible. One primitive custom, reciprocal gift-giving and hospitality, is alleged to be a mutual insurance scheme, an allegation there are strong reasons to doubt. This custom, then, is said to be the ancestor of the modern welfare state. Both the ancient custom and its modern equivalent are efficient because mutual insurance that redistributes risk is itself efficient. The article demonstrates that mutual insurance and the welfare state are different in essential respects, and the legitimising analogy is false.