Laws and development : An economic approach

Dr L Krishnamangol Singh

There is a view that an economic system can function without laws. In this view, there is no role of the government and the economic system works efficiently without intervention of the government or with least intervention of the government. The classical theory of economics is based on this model of development. Whether this view is relevant today is a critical question. In trying to answer this question, I shall examine the relevance of a sound legal system for the effective functioning of an economy. And this aspect will be taken up in the later part of this brief article.

Next, I shall proceed to draw our attention to the need for new laws for the society and economy. Historically, it is found that there were laws or principles of the society in the Old Testament in Hebrew society about 2500 years B.C. And the laws or the principles for the society and economy were also found in the New Testament. And these laws were followed in many ancient civilizations. And Rome was also famous for developing knowledge on jurisprudence. Parallel other ancient civilizations were also found in different parts of the world, where different laws prevailed for administration of the country.

Credit for developing laws for the state were also given to Plato and Aristotle in Greece in ancient times. In fact, knowledge traveled across national boundaries in the real world, and several countries had also followed different laws for the management of the society, economy and the whole polity. But many systems of administration and power of the states broke down due to the absence of proper laws, and poor implementation of the laws and public policies. And, in the history of human civilisation, “ideas never die” as “tomorrow never dies”. In fact, the old ideas are essential for developing new ideas. And, the best ideas will be necessary for a better tomorrow.

Therefore, the political leaders, economists and all experts think of long-term development for a better future while paying attention to the short-term problems also. And, several laws and economic policies are thus formulated to bring about social and economic justice for the well-being of the people. In fact, the old ideas and laws cannot bring about change in the society and economy. And, new laws and public policies will also be required for bringing about rapid change and development in the society and economy. Here, it is interesting to note that the entire Marxian doctrines is intended to bring about change (i.e. social and economic changes) from the obsolete or outdated system to a new form of change. As Marx had stated: “We suffer not only from living but also from death.” Marx’s philosophy is that the old ideas need to be replaced by new ideas. In fact, people will continue to suffer if there is no change in the obsolete “modes of production” (i.e. the social and economic relationship among classes). If the outdated modes of production, which prevailed in the past still continues to exist, people will continue to suffer even if they live in a new generation. Therefore, instead of going to the path of extreme cases or courses, it would be rational to frame suitable laws, rules and regulations, and public policies or economic policies for promoting rapid socio-economic transformation of the country including the states.

In analysing the problems of feudalism and capitalism, many thinkers also believe in the path to reforms for rapid socio-economic changes. Therefore, it is the responsibility of the Governments, particularly the central and state governments of India to enact and adopt new laws and public policies to address the emerging issues in various fields or aspects in the country and also in the states. And, the new laws need to protect the human rights and general interests of the people within the country and also in the respective states. Thus, various types of laws have been prevailing or following since the evolution or emergence of the nation states or countries in different parts of the world.   And the existence of judiciary or court is a clear testimony to the need for a sound legal system for the enforcement of the various types of laws for the administration of justice in the society of any country. While the view for a sound or effective legal system is already accepted, what is more necessary is to develop new laws, and rules and regulations and appropriate public or economic policies in order to deliver appropriate social and economic justice in the country and in states. Therefore, it is worthwhile to consider the following issues. First, what would happen when there is no law? Secondly, whether the existing laws are sufficient for the administration of justice? Thirdly, why new laws are being developed, enacted and passed and implemented? And why there is poor implementation of the laws?, etc. I cannot claim originality for these questions as these are already known. Again, these questions are put not to provoke the experts, authorities and the people but to examine the linkages between or among the best legal system, rules and regulations, public policies, political and economic system and overall development of the society and economy. We may now concentrate on some of the critical issues in order to formulate effective policy decisions based on the best ideas or choices. Thus, the following points deserve careful consideration in the economics of laws, choice and development.

1. Here, it can be pointed out that in a lawless society, many are in the game to extract benefits. Again, in an organisation, where there is lack of authority and proper rules and regulations, many are again in the game to play as free riders (the theory of free riders seeks to get benefits without paying taxes or incurring any cost). This (the game of free riders) has developed the attitude of non-cooperation among the members or people in the community, which results in zero-sum game.

* The writer is in the teaching and research profession of economics, Imphal College, Imphal.

(To be contd)