Economic Value of the Rule of Law

Most people underestimate just how economically valuable the rule of law is. A roughly stable investment environment that doesn't maximize social justice is undoubtedly better than an unpredictible one that tries to--just as the billions of poor people who live in states that have tried to exchange the former for the latter. The winners were not the dispossessed.

This can be exaggerated--markets have memories, but they don't last forever, and robust democracies can survive a fair amount of skullduggery at the margins. But on balance, I doubt that deal maximized utility compared to an alternative where the government stayed out of it and Chrysler made whatever deal it could.

via The Better Bankruptcy Bureau - Megan McArdle.

(Emphasis added.)