It's not "the market or the state"; it is, almost always, "the market and the state". A state that can enforce property rights is highly likely to be able to do a lot more useful things. A state that cannot do many useful things—one that is incompetent or corrupt—is highly likely to be unable to enforce the property rights that underpin markets either: Timothy Besley and Torsten Persson: The Origins of State Capacity: Property Rights, Taxation, and Politics: "'Policy choices' in market regulation and taxation are constrained by past investments in the legal and fiscal capacity of the state. We study the economic and political determinants of such investments and find that legal and fiscal capacity are typically complements. Our theoretical results show that, among other things, common interest public goods, such as fighting external wars, as well as political stability and inclusive political institutions, are conducive to building state capacity of both forms. Our preliminary empirical results uncover a number of correlations in cross-country data which are consistent with the theory...


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