Alex0810“Every man has a natural right to the free exercise of his faculties provided he does not employ them to the injury of himself or others. This right to liberty implies as a corollary the right to property,” wrote François Quesnay, the founder of the Physiocrats. Our corrupted nature obviously requires some constraints, an institutional structure to promote the freedom of the individual to chase after his dreams and to protect him and his property from injury inflicted by others. But what determines the success of a particular regulatory system?

One day, the future Louis XVI complained to his father’s physician about how complex and demanding his life would become when he inherits the throne. Quesnay assured the young prince that he had nothing to worry about since a wise ruler has almost nothing to do. Louis must have been flabbergasted as he asked, “But then who would govern?” “The law,” came back the simple answer. By the time Louis grew up to become a king he must have forgotten the lesson and paid a high price.

The Russian czarina Catherine the Great received the same answer from one of Quesnay’s followers, Mercier de la Rivière. She kept pressing her guest with questions on how to create the best law only to get scolded by the French political economist: “To give or make laws, Madame, is a task which God has left to no one. . . . What is man, to think himself capable of dictating laws to beings whom he knows not?” “To what, then,” asked the indignant monarch, “do you reduce the science of government?” The reply: “To studying carefully, recognizing, and setting forth the laws which God has engraved so manifestly in the very organization of men, when he called them into existence. To wish to go any further would be a great misfortune and a most destructive undertaking.”

Economists recognize that the main benefit of decentralized organizational structures is the option of local experimentation. The United States federalist system is the most successful example of this advantage. Local and state governments have significant freedom to try various regulations and policies—rejecting or amending rules that do not deliver results, keeping or copying those that work best. Discovering the right laws, the natural rules to regulate and enhance our freedoms, is a messy process. The good news is that the mess is localized and relatively easy to clean up—unlike those instances when we allow the infringements of Washington in matters that should never be federal concerns such as healthcare, education, and charity.