THE POVERTY OF NATIONSKarl Brunner

The Condition of Poverty andthe Creation of Wealth

Poverty remains an endemic state of man. The curse imposed byan angry god on Adam and his descendants describes the humanfate. Man experienced over history, with rare exceptions, toil, hard-ship and oppression. The uncertain and stringent conditions of lifechallenged man’s awareness. He sought for answers explaining thisfate and these were couched in the form of myths and legends. Animaginative human mind invoked a fall from graceor a curse imposedby gods. Such orientations naturally affected man’s expectations ofliberation from the grinding burden of toil and hardship. The resto-ration of grace appeared to be the crucial condition for such liberation.

This elementary message emerged over the centuries in very dif-ferent forms and in widely varying detail. The basic story of man’sfate conveyed by ancient myths still persists with a subtle and per-vasive influence. The dominant ideologies of our time promise therestoration of(at least secular) grace with the liberation from humanbondage topoverty. This promise of liberation should be realized bya collective action imposing a set of explicitly designed politicalinstitutions as the dominantmechanism for the coordination ofsociety,

The ancient themes still reverberate under new labels in variousbranches of sociology or social psychology. But their influentialrepercussions on the intelligentsia market have been challenged for200 years by the evolution of economic analysis. This analysis, ini-tiated by the Scottish philosophers of the 18th century, offered arevolutionary insight into the social context ofman’s life This insight

Cato Journal, Vol.5, No. 1 (Spring/Summer 1985). Copyright © Cato Institute. Allrights reserved,

The author is Fred H. Gowen Professor ofEconomies and Director of the Center forResearch in Government Policy and Business at the Graduate School of Management,University ofRochester, An earlier version of this paper appeared in the January 1985issue ofBusiness Economics.

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has hardly been absorbed or understood by the educated middleclasses of western societies and even less by the professionalarticulators.

The Scottish tradition of economic analysis explains the emer-gence of social groups and “great societies” extending social inter-action far beyond face-to-face associations. It also explains the emer-gence of political structures without invoking metaphysical entities.This tradition shows in particular how the social structure emergesas resourceful human agents interact to improve their lot accordingto their judgment and understanding. The social structure appearsin this maimer as an importantbut quite unintentional by-product ofthis interaction,

The same analysis also addresses the condition of poverty and thecreation of wealth. The wealth of nations, expressed by the standardof living, depends foremost on individual effort, ingenuity, and imag-inative adaptation to the environment. The natural environmenttogether with the resources provided by nature can make a substan-tial difference for a nation’s opportunities. These opportunities offeredby nature condition the pattern of activities and the use of availablehuman and nonhuman resources. But the possessions of naturalresources do not determine a nation’s wealth and do not, per se,suspend Adam’s curse. Nature’s heritage forms, contrary to widelyheld beliefs well represented by the Brandt Report on the North-South dialogue,neither a necessary nor a sufficient condition for highor rising levels of wealth. More than 50 years ago Argentina wasexpected to evolve on the basis of its natural resources into one ofthe world’s wealthiest nations. Ft approached in contrast a pattern ofpermanent stagnation. We still encounter “experts” informing us thatArgentina with its vast resources should really be expected to over-come, in due course, its current difficulties. Brazil should also be onthis count among the wealthiest nations today. Switzerland, lessfavored with natural resources than Zaire, Nigeria, Mexico, and othernations, should appear among the poorer nations appealing for aidfrom Argentina, Brazil, Mexico and others. We may also compareHong Kong, South Korea, Taiwan, and Singapore with more favorednations. Or consider the permanent stagnation of Tanzania and Zim-babwe in All-lea or of Bolivia and Peru in South America.

Political power has frequently been singled out as a crucial factorofa more widely conceived “natural environment” which decisivelyaffects the wealth of nations. The Brandt Report exemplifies onceagain this view. But history and economic analysis fail tosupport thisclaim. Nations with little power experienced over the past 100 yearsor more a remarkable increase in wealth. This accrual of wealth

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occurred moreover not at the cost of other (more powerful?) nationsbut contributed actually to benefit others through an expanded eco-nomic interaction.

Poverty is characterized by a low rate of production of goods andservices. The creation of wealth involves an expansion of this pro-duction, Western nations experienced this process over the last 200years on a scale never before recorded in history. Power can simplynot explain this phenomenon. Power does not produce goods, itsimply absorbs and uses goods to maintain the power apparatus—anomenklatura. Power, however, may be applied to extract wealthfrom those who produced it, an exercise that does not create wealthbut actually destroys it in the final analysis. The emphasis on powerthus confuses the creation and the redistribution of wealth. It alsofails to understand the longer-run consequences of redistributivepower. The argument based on power frequently occurs in a contextlinking the accumulation of wealth in Western nations with colo-nialism. But Adam Smith already elaborated the crucial implicationsofcolonialism. He recognized that colonialism meant a loss in wealthfor the colonizing nation combined with a domestic redistributionfavoring specific groups involved in the process. This redistribution,and not any general accrual ofwealth, was the historical driving forceof colonization.The exercise ofpower applied to colonial efforts thusimposed an economic burden on the mother country.

Our attention clearly must be directed beyond natural resourcesand power to human effort and resourceful ingenuity. The foundingfathess of modern economic analysis recognized the central impor-tance of human capital and investment in human capital as a condi-tion of the wealth of nations. The development of the German econ-omy after World War II dramatically confirmed this contention. Buteffort and resourceful ingenuity are not “sociological data” deter-mined by the mysteries of a “mental attitude,” a “religious commit-ment” or an inherited “work ethic.” Customs, traditions, and culturalvalues may play a role for a while. However, they will diminish inimportance and behavior will adjust once the supporting conditionshave eroded. Economic analysis informs usthat effort and resourcefulprobing emerge with substantially greater frequency and intensitywhen human agents expect to capture the benefits of their searchactivity and their ingenuity. Withoutthe incentives of potential rewardsagents hardly will find it worthwhile to expend much effort andingenuity. The magnitude and quality of effort and the intensity ofsearch for imaginative innovations in types and use of resources isgenerally closely linked with the expectation ofcapturing the returnsfrom these endeavors, The penalty-reward system thus conditions

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the current level of human endeavor. Economic incentives also shapethe accumulation of human capital expressed by the level and qualityof skills and the development of nonhuman resources with the pro-ductive modification of the environment.

The power argument outlined above fails to comprehend the cen-tral role of incentives and the close link between the investment ofone’s efforts and the capture of expected returns. It proceeds as ifthere operated no incentive feedback from the distribution of theproduct to its supply. The argument suggests on the contrary that allgoods are to be grabbed by participants in a social game. The pow-erful acquire the lion’s share of the economic pie and the losers getthe crumbs. The natural conclusion from this romantic vision is thatthe balance of power needs to be changed.

The message conveyed by economic analysis thus directs ourattention to the conditions that encourage the application of humaneffort and ingenuity to the inheritance determined by history andthe environment. These conditions do not depend on nature. Theyare determined by the social organization characterizing a society.The prevailing sociopolitical institutions condition the potentialopportunities facinghuman agents. They ultimately shape the incen-tives that guide human effort and ingenuity, and that evolve overtime into customs, habits, andtraditions. Such customs and traditions,however, can be destroyed by institutional changes that lower theexpectation of a link between effort and real benefit. Thus we rec-ognize in the pattern of existing sociopolitical institutions the crucialcondition for both wealth creation and the persistence of widespreadpoverty. A stagnant economy and persistent poverty therefore do notexpress a curse of vengeful gods (in the heavens or in history) to beatoned by a purifying collective action. Rather, such stagnation andpoverty result essentially from the inheritance of social institutionsaffecting individual behavior.

The Ambivalence of the Political Structure

The nature of institutions maintaining poverty or fostering wealthcreation requires some further attention. The role of the politicalstructure, and specifically of the state, needs to be clarified in thiscontext.

The social productivity ofthe political structure is best understoodin comparison with a state of anarchy. An agent arranging his affairsunder anarchy has the following options for the use of his resources:he can invest in production, in trade, in attempts of robbery, and indefense against others. The exposure to potential loss of resources

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due to piracy by others lowers the incentive to invest in production.It also constrains the opportunity to trade. Under the circumstancesproductive activity addressed to wealth creation remains at a lowlevel. All agents seem tobe caught in the trap ofa prisoner’s dilemma.The repetitive occurrence ofthe basic social problem posed by anar-chy, however, induces the interacting responses so well describedby the founders of economic analysis and more recently elaboratedby Hayek (1982). The evolution of political institutions offers in thisrespect a solution to the prisoner’s dilemma inherent in a state ofanarchy.

Consider the options available to an agent arranging his activitiesin the context of the political structure. He can invest his resourcesagain in four different ways: in production, in trade, in the politicalprocess to redistribute wealth on his behalf, and in the politicalprocess as a defense against wealth redistribution schemes advancedby others. Anarchy and the political structure are thus not distin-guished by presence or absence ofa zero (or possibly even negative)sum game of social interaction. We recognizeat this stage the peculiarambivalence of the political structure. This structure establishes rulesof the social game. Such rules substantially confine the wealth-impeding activities ofanarchy but they never totally eliminate them,as exemplified by the Mafia and the Camorra. The rules thereforeprovide a “monopoly of violence” anchored by the political structure.This monopoly forms a necessary condition for the specification ofproperty rights and their enforcement. Investment in production andin activities raising the level and quality of human and nonhumanresources is encouraged as a result of the greater expectation ofcapturing the returns under the rules ofthe social game. Specificationand enforcement of property rights also encourage a wider range ofpossible transactions and provides new opportunities for mutuallybeneficial trade. The resulting increase in the creation of wealthexpresses the remarkable productivity of a stable political structurethat allows individuals to capture the benefits of increased economicefficiency.

The magnitude and extent of the benefits accruing from the polit-ical structure, however, depend on the institutional arrangementsguiding the coordination of socioeconomic activities. In this contextprivate property exhibits a crucial advantage that is not well under-stood by most professional articulators in the public arena. Theassignment of property rights resolves a physical impossibility asso-ciated with potential social conflicts. Scarce resources cannot becontrolled simultaneously by several persons. The structure of rightsdetermines who can do what with respect to which scarce object.

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This structure fully reflects the inherited patterns of resources. Itmirrors in this sense the constraints imposedby nature. All resourcesneed be owned by some person and beyond this no rights should beassigned,’ This condition rules out the wide array of market closingand entry restricting arrangements under any name. Private propertyrights also guarantee the important link between effort and rewardthat was emphasized above. Under such a system this link is actuallygeneralized to transactors beyond the range of owners of nonhumanresources.

No rules of the social game however can preclude a new form ofwealth-impeding activities from replacing the ancient patterns ofanarchic wealth impediments. The problem actually adheres to anyset ofrules, All political structures determine potential opportunitiesfor manipulation within the rules accepted for their operations. Theyunavoidably offer incentives tobe used for purposes ofwealth redis-tribution among the participants of the social game. There is hardlya political institution that does not have consequences for the distri-bution of wealth. Agents respond to this fact by investing resourcesin the political process in order to generate wealth transfers fromothers or toward off attempted transfers by others. This aspect ofthepolitical structure involves basically a negative sum game within thecontext of the socially productive positive sum game provided by astable set of rules. The incentives to invest in the political processforpurposes of acquiringwealth from others or for protective politicalactions lowers the allocation ofresources tosocially productive activ-ities. The taxes imposed by implicit or explicit wealth transfers occur-ring in one form or another lower moreover the incentive to investin production, trade, and the accumulation of resources. These con-sequences determine the inherent ambiguity of the state expressedby thejoint operationofa positive and negative sumgame proceedingin the context of political institutions organizing the social interaction.

All political structure thus involves simultaneously a wealth-cre-ating and a wealth-impeding dimension. In contrast to the state ofanarchy, however, the wealth-obstructing activities proceed in accor-dance to a recognized and generally accepted set of rules, Politicalstructure thus lowers, but does not remove, the uncertainty confront-ing agents’ socially productive activities. The magnitude of the low-ered uncertainty or, in otherwords, the extent ofthe wealth-impedingrange of activities associated with the political structure dependscrucially on the detail of the sociopolitical institution. Every set ofpolitical institutions produces its specific mix of positive and nega-

‘See Meckling and Jensen (1980).

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tive sum social games. The weight of wealth-impeding activitiesdepends thus on the sociopolitical arrangements of nations.

The nature of wealth-fostering and wealth-impeding political insti-tutions may be usefully described in rough outline. The distinctionbetween the two dimensions of the state may be usefully introducedfor this purpose. These dimensions refer to the “protective state”and the “redistributive state.” This classification is essentially justi-fied in terms of the purpose of political institutions but holds onlyapproximately in terms of their consequences.

Robert Nozick (1974) and James Buchanan (1977) demonstratedthe redistributive dimension unavoidably embedded in the protec-tive state. The protective state encompasses a set of political insti-tutions that define general rules offering a stable framework for agents’productive activities. Such rules involve most particularly the defi-nition of private property, the protective arrangements of police andcourts associated with this definition, enforceability of privatelynegotiated contracts, and stable and predictable fiscal proceduresincluding monetary policy. The rules bearing on the government’sfinancial affairs need explicit recognition in this context. Unpredict-able explicit changes in taxation or implicit changes via erratic infla-tion in a world of tax rates addressed to nominal values can substan-tially lower the incentives of the positive sum social game. A richvariety of observations informs us that the detail of the politicalframework shaping the social institutions listed above substantiallyinfluences the productivity of the social game. Well-designed polit-ical structures foster the evolution of markets and improve theirfunctioning. Moreover the higher level of predictability tends toencourage the accumulation of resources. These consequences areessential strands of a wealth-creating social process. This followsfrom the fundamental fact that the social institutions protected bythe type ofpolitical structure under consideration assure, on average,a systematic link between effort and ingenuity applied on the oneside and the resulting returns on the other. We may formulate thismore generally as a set of institutions that raise the probability of alink between the consequences of actions and the agents committingthese actions. They also lower the likelihood of market closing andentry restricting activities.

An alternative set of rules or institutions embodied in politicalstructures represented by the redistributive state typically producewealth-impeding consequences. The class of these political institu-tions exhibits a rich detail testifying to man’s inventiveness. We maydivide this vast detail into two broad groups for our purposes. Onegroup involves constraints on choices bearingon contractual arrange-

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mentsand the tenure of property. The other group contains structureswith direct distributional consequences and associated distortions ofincentives. Although this division is neither neat nor clean, a betterorganization of the material may emerge from further discussion.

The argument outlined above suggests that the creation of wealthor entrenched poverty is substantially conditioned by both levels ofthe political apparatus, the protective state and the redistributionalstate. Too little ofthe first and too much ofthe second obstruct wealthcreation and maintain pockets of poverty or even mass poverty. Anuncertain or more or less deliberate failure to exercise the basicprotective function erodes the link between productive effort andcapture of expected returns. This experience can be observed overhistory and continues in our time. I have already mentioned Argen-tina, and we can point to the permanent political instability andlonger-run uncertainty bearing on important sociopolitical institu-tions in Bolivia, Peru, possibly Chile in South America, Zimbabweand other nations in Africa. The social context of these nations pro-vides few, or weak, incentives to create wealth through productiveinvestment. The context spurs incentives directed toward the con-quest of political control with the acquisition ofthe associated spoils.The resulting pattern of entrenched poverty cannot be alleviated bydoses of foreign aid. Such aid essentially contributes to raise theresources available to the local nontenklatura. It cannot replace oroffset the absence of an adequate protective state.2

The realization of the basic protective function may be offset tosome extent by the state’s redistributional activities. Constraints oncontractual arrangements and the effect of sociopolitical conditionson property tenure exemplify this aspect. The usual textbook treat-ment of production obscures this important point. Weread that outputis linked with an array of inputs via a production function. Thisfunction purportedly represents the underlying technology. Thisinterpretation is thoroughly misleading, however. The nature of theproduction function is sensitively conditioned by sociopolitical cir-cumstances. The production function actually forms the outcome ofagents’ optimizing responses to these conditions. It follows that vari-ations in the admissible range of contractual arrangements or asso-ciated organizational forms modify the production function. Con-straints on admissible contractual arrangements tend to lower outputfor any given input. Consequently they impoverish a society andobstruct the imaginative search for new modes of wealth creation,

2See Bauer (1978).

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The imposition of self-management or codetermination illustratesthe issue. The organizational forms may survive successfully in com-petition with the corporation and other forms. They may exhibit acomparative advantage for specific activities. Our experience clearlyindicates however that this comparative advantage occurs over a verylimited range. A coercive imposition ofthese forms forces, therefore,the organization of production into a mold less adapted to the coor-dination ofresources in production. A comparative decline in outputthus emerges. Detailed investigations of the incentives prevailingunder self-management and codetermination confirm the results ofeconomic analysis. These investigations also show that self-manage-ment in particular creates new social tensions and conflicts betweenyounger and older workers, or between established workers andpotential new workers entering the market,

Corporate governance is another fashionable issue that should bementioned here. Modifications of governance are proposed in orderto achieve purportedly desirable social goals. The sense of theseproposals usually conveys that they impose no social costs and willachieve the desired effects. Economic analysis disillusions us onboth counts. The social costs inparticular will rise with the severityof constraints controlling corporate organizations.

The change in the law governing insolvency in Germany and the“comparable worth” movement in the United States offer furtherexamples ofcontractual constraints. The assignment ofpriority rightsto several months salary beyond the date of filing for bankruptcyraises the cost of capital, impedes investments, and affects employ-ment, A systematic application of “comparable worth” procedureswould seriously impede the organization of production and imposesocial costs in terms of lessened output of goods and services.

Pharmaceutical regulations and the admissible range for the formsof property tenure are the last examples of constraints on the pro-duction function potentially lowering welfare. The prevailing regu-lation of pharmaceutical products confines both contractual proce-dures and the choice of production processes. It has increased thecost of operation and, via the reduction in the relevant economicduration ofthe patent, it has lowered the expected return. Moreover,the regulatory constraints have lowered new pharmaceutical inno-vation and thus the achievable state of health.

The modification of the patent’s relevant duration actually abro-gates established property rights. Constraints on the form of propertytenure can significantly impair the nature of the social productionfunction. In many countries around the world land is frequentlytended by peasants under a usufruct system. Irrespective of the

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political motives behind this tenure system an examination of itsoperation reveals that it obstructs productivity of agricultural labor,obstructs investment that would improve the quality of land, andencourages population growth in the countryside. The collectiviza-tion of agriculture offers a particularly emphatic exampleof obstruc-tive institutionalization. It eroded incentives to produce and raisedincentives for a wasteful use of resources. Agricultural output natu-rally suffers. Socialist nations from Tanzania to Russia exemplify ourcase with remarkable clearness. The land tenure system imposedassured a permanent agricultural crisis.

The second strand ofthe redistributional state encompasses exam-ples from the welfare system of Western societies, the oligarchicpower structure of nations in the Third World, the nomenklatura ofsocialist countries, or some patterns ofnonsocialist dictatorships. Thewelfare system of Western nations imposed a massively acceleratedredistribution which lowered incentives to work, invest, and save.On the other hand it raised incentives to invest resources in thenegative sum game of political processes.

The oligarchies of many nations in the Third World depend fortheir survival on a persistent redistribution of wealth from the coun-tryside to the cities, Their political base is usually anchored with thepopulace in the cities. In order to maintain their power the rulingoligarchies find it advisable to impose low prices on agriculturalproducts. This pattern destroys incentives to produce food, erodesincentives to invest resources in agricultural operations, and createsincentives to abandon fertile land and join the masses in the cities.

Most socialist countries operate a vast system redistributing wealthfrom the potentially productive sector to the nornenklatura—a sociallyunproductive sector composed of a huge military complex, an inter-nal security and economid control apparatus. Once again this redis-tribution system lowers incentives for the productiveuse of resources.Nonsocialist military dictatorships also require for their survival aredistribution favoring the military apparatus with similar conse-quences for the wealth-creating dimension of the social process.

The evolution of labor markets over the past 16 years reveals thatWestern nations participated in their own way to obstruct, usuallywith the best intentions, the wealth-creating process, Unemploy-ment in European countries stayed very low until about the end ofthe sixties. The pattern changed dramatically during the seventies,Unemployment rates rose to the double-digit range. Belgium andthe Netherlands measured recently unemployment rates above 15percent. With the exceptionof Switzerland almost all European nationsexperienced massive increases in measured unemployment. Politi-

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cians and the media frequently attribute this development to newtechnologies. In the public arena one also encounters comparisonswith the Great Depression. This comparison fails however. The ris-ing trend in European unemployment occurred, in contrast to thethirties, during a period ofexpansionary financialpolicies. Moreover,as we learn from economic analysis, technology cannot explain thisunemployment either. Technological innovations change opportu-nities. Old jobs disappear and newjobs emerge. The American expe-rience of the last 30 years demonstrates that reasonably functioningmarket processes continuously create new jobs and offer newemployment.

The crucial conditions pertain to the sociopolitical institutionsunder which markets operate. MostEuropean countries experienced,in this context, major changes. A variety of arrangements affectingthe operation oflabor markets were introduced by European govern-ments. These arrangements include measures of employment pro-tection, liberalizations of unemployment support, increasing payrolland social security taxes imposed on employers and similar measures.Employment protection, represented among other procedures byincreased compensation payments upon dismissal, raised the expectedreal cost of employment relative to the real return expected fromemployment. The same result holds for increased payroll taxes andother obligations associated with employment. It follows that eithernet real wages fall or employment declines relatively. These adjust-ments are unavoidable. As it happened, the resulting adjustmentsoccurred in most nations dominantly in the employment-unemploy-ment dimension. No single step or single measure introduced in thisevolution involved any dramatic or crucial changes. But their cumu-lative effect over time did change the operation of the economy.Whatever the motivation and intention of the political decisionsshaping this evolution they produced a stagnant labor market. Vasthuman resources are poorly used, and nations are significantly poorerthan they otherwise would be. The petrification of labor marketscaused by a long sequence of political decisions also endangers thefuture course of Western societies. Technological innovations—anecessary condition ofrising wealth in our history—will increasinglyevolve as a social threat in the context of petrified markets. Underthe circumstances the resulting political decisions tend to obstructthe wealth-creating process even further. Proposals to lower theworking time per week to 35 or 25 hours illustrate this point.

The evolution of labor markets, however important, offers just onestrand to our theme about the wealth and poverty of nations. Thegovernment’s fiscaloperations deserve some attention in this respect,

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In an investigation of the consequences of taxes and governmentexpenditures on the pattern of resource allocation, it was estimatedthat the general welfare of the United Kingdomwas lowered by about8 percent. Thus taxes and most’particularly expenditure patternsseverely distorted the allocation of resources.

A reference also should be made to the rising tide of protectionism.The range of protectionist schemes has expanded and evolved inimaginatively subtle complexity. The rationale for and the welfareimplications of protectionism have barely changed over the centu-ries. Protectionistpolicies continue to redistribute wealth, benefitingspecial groups at the expense ofthe i’est of society. The highly visiblebenefit of the favored group in conjunction with the widely dis-persed—and thus less visible—social costs misleads politicians andpublicists into believing that protectionist institutions increase gen-eral wealth. The redistribution produced by such policies is typicallyassociated with a comparative social impoverishment. The ideologyand illusion of protectionism as a necessary condition for fosteringwealth creation permeates France, South America, and influentialgroups in many other nations.

Conclusion

History demonstrates, analogously to biological experimentationvia mutation, an endless experimentation with social organizationsand associated cultural terms, attitudes, and values. These organi-zations yield very different survival characteristics in competitionwith other social groups. They also determine the long-run chancesof rising wealth or entrenched poverty and disease. The intentional,and frequently unintentional, evolution of the sociopolitical institu-tions decisively determines, ultimately, the conditions of poverty orwealth creation irrespective of the evolution’s motivating concep-tions. The role of political structure, represented by the state and itsapparatus, thus deserves careful and intense attention in this context,The illusion is widely held that the state produces wealth, and,moreparticularly, that little wealth will be created without the detailedand controlling intervention of the state.

Another illusion dominating our time and well represented amongthe Christian churches holds that government intervention addressedto massive redistribution cannot affect the incentives guiding thesocial process of wealth creation. The translation of moral fervor “tohelp the poor” into institutional arrangements that lower opportu-nities and entrench poverty is one of the saddest ironies of our age.It is a small step from such beliefs to the view, implicit in the legal

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thesis of “tax-expenditures,” that all wealth really belongs to thestate and is conditionally and revocably leased to individual agents.

Our discussion reveals the nature of the misconception assertinga direct productivity ofthe state. The state isnot aproducer ofwealth,It shapes conditions that encourage the creation ofwealth. But it alsofrequently represents political institutions that impede expandingwelfare. The state can, and frequently does, obstruct the wealth-creating process and contributes to sustained poverty. Its wealth-impeding activities yield an economic rent to a small group withaccess to the sociopolitical institutions. The emerging social orga-nization of Western societies will thus determine whether a nationaccumulates wealth or persists in poverty,

ReferencesBauer, Peter T, “Western Guilt and Third World Poverty.” In The First World

& the Third World. Edited by Karl Brunner. Rochester, N.Y.: Universityof Rochester Policy Center Puhlications, 1978.

Buchanan, James M. The Limits ofLiberty: Between Anarchy and Leviathan.Chicago: University of Chicago Press, 1977.

Hayek, F. A. Law, Legislation and Liberty. Reprint (3 vols. in 1). LondomRoutledge & Kegal Paul, 1982.

Meckling, William H,, and Jensen, Michael C. “A Positive Analysis of RightsSystems.” Working paper, University of Rochester, Graduate School ofManagement, 1980.

Nozick, Rohert. Anarchy, State, and Utopia. New York: Basic Books, 1974.

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