On Regime Uncertainty and Legal Entrepreneurship

By Wisniewski, Jakub Bozydar | Independent Review, Fall 2012 | Go to article overview

On Regime Uncertainty and Legal Entrepreneurship


Wisniewski, Jakub Bozydar, Independent Review


According to economic historian Robert Higgs (1997), an important reason why the Great Depression lasted as long as it did was the prevalence of what he terms "regime uncertainty"--that is, the kind of uncertainty that businesspeople, investors, and entrepreneurs feel in a political and legal environment that threatens to tax and regulate their wealth-generating activities to the extent that they can in many cases no longer expect these activities to be profitable. In other words, the problem is not the uncertainty produced by unpredictable consumer behavior or natural phenomena, but the uncertainty that politicians and bureaucrats create.

However, insofar as the ability to forecast uncertain future accurately can be seen as the main source of entrepreneurial profits (Shackle 1958, 1968; Mises [1949] 1966; Salerno 2008), (1) we may wonder why the emergence of regime uncertainty should be viewed as an especially destructive deterrent to entrepreneurship rather than as an obstacle that entrepreneurs should be uniquely suited to deal with.

The only satisfactory response to this question is one that makes a meaningful distinction between regime uncertainty and its "standard" market counterpart. (2) It would be difficult to think of the former as simply a particularly intense and overwhelming degree of the latter because doing so would suggest that the conditions of regime uncertainty simply make the standards of successful entrepreneurship more exacting, which is inconsistent with the fact that such conditions adversely affect the activities of all entrepreneurs, not only the supposedly insufficiently competent ones. It would likewise be difficult to regard regime uncertainty as qualitatively different from its more familiar counterpart in the sense that it cannot be successfully borne by even the most acute entrepreneur because then the emergence of the phenomenon in question would completely eradicate rather than severely reduce the scale and scope of business activities.

Hence, the most promising answer in this context seems to be that regime uncertainty is not qualitatively different from "ordinary" market uncertainty, but it operates on a different level, which is normally removed from the ambit of entrepreneurial decision making. In order to illustrate this claim, I refer to the hierarchy of levels of social analysis proposed by Oliver Williamson (2000). In this hierarchy, the first level is occupied by soft institutions--customs, traditions, norms, and religions-which emerge largely spontaneously and develop in an evolutionary manner, thus changing very slowly and allowing comparatively little scope for everyday uncertainty understood in the way discussed earlier. On the second level are hard institutions, whose purpose is to specify "the formal rules of the game" (Williamson 2000, 597), such as property rights, contract law, and so forth. The third level relates to the "play of the game," especially to "aligning governance structures with transactions" (Williamson 2000, 597)--that is, to the ways in which entrepreneurs give their firms and projects an appropriate organizational structure. Finally, the fourth level deals with the strict essence of entrepreneurial activity, aligning the existing and future supply of consumer and producer goods of various orders as well as the existing and future technological possibilities with ever-changing consumer preferences.

The crucial point here is that entrepreneurship operates on levels three and four, which are composed almost exclusively of variables, but not on levels one and two, which are supposed to provide the underlying framework of constants. In other words, the content of particular contracts that any given entrepreneur concludes and the types of property that he purchases or sells during his daily activities can be--and usually are--in constant flux, but the nature of the underlying contract law and property rights has to be sufficiently fixed or at least predictable if the entrepreneur is to have any chance to conduct such activities profitably. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

On Regime Uncertainty and Legal Entrepreneurship
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.