Enforcement

Abstract

Enforcement, with its usual connotations of agents being compelled to behave in ways that are at variance with how they would like to act, seems a long way removed from the conventional neoclassical approach of laissez-faire inherent in a decentralized economic system. If an enforcement mechanism is viewed as a method by which rule-breaking may be discouraged then laissez-faire attempts to be a set of rules that are self-enforceable so that no formal enforcement mechanism is required (see Stigler 1970 for a useful discussion of enforcement). But it is clear that decentralizability is not, in itself, enough. For instance, the fact that tax evasion is kept in check only by legal pressure shows how the addition of a tax system to a decentralized competitive structure may destroy self-enforceability. The possibility of gain by the exercise of monopoly power shows how the rule of price-taking behaviour is not immune to the problems of enforcement.