Are Institutions Important or Needed?

institutions important

Have you ever really … I mean really wondered?

Is there a point in working hard in order to buy goods when it is “perfectly legal” to be able to take someone else’s goods?

If theft was legal or if it was illegal but unenforced, then we would most certainly have economic and social chaos! We would have no incentive to i.e. build houses for others, to sell bread or to produce anything at all.

That is why it is economically and ethically important to have strict laws, property rights and good governments to enforce them all!

Governments and their related institutions provide numerous critical functions to the economy. Among other things, we need them to enforce contracts that private parties voluntarily form between themselves.

We need governments and institutions to supply us with a monetary system and we do need them to provide for the national defense and etc.

These are all goods and services that all societies need and want very much indeed, which the private sector can not supply or can not provide for dependably enough.

When these governments or institutions — our local and national governments, the various regulatory agencies, unions, financial system, courts, tax or law enforcement agencies and etc — function efficiently and fairly, then the economy and the society will most certainly prosper!

But when corruption, enormous inefficiencies and waste characterize a society’s key institutions, then the economy and the society is doomed …

Then we do not need those institutions!