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Facilitating private-voluntary associations

30 September, 2015 - 16:26

A second function of government is to facilitate private-voluntary associations. A contract is a legally enforceable agreement, and government encourages private-voluntary associations chiefly through laws regarding contracts. Of course, not all private agreements are enforceable. A co-ed agreeing to go out on a date with her boyfriend, for example, cannot be compelled to do so by a court if she tries to back out. Nor will any court order her to pay money damages to her friend even, if relying on her agreement, he obtains theater tickets or rents an automobile. But the fact that some agreements are legally enforceable increases our options, as Gordon Tullock explains:

It is clear that situations in which making such an enforceable promise is desirable are fairly frequent. I wish to buy a house and do not have enough money to do so. Borrowing the money will improve my satisfaction, but in order to borrow I have to convince the lender that I will repay. Perhaps I can get away with an unenforceable promise, but for most people such loans are only possible if there is some mechanism to enforce the repayment.1

Government not only makes enforceable agreements possible but it provides neutral judges to resolve disputes about such agreements. Some parties bypass the judge by jointly sending disputes to an arbitrator, but the courts are always available when less extreme measures fail. Without government, terms of voluntary associations would only be enforceable by the parties and their private associates, a messy and inefficient process at best. Government thus allows voluntary associations on a scale otherwise impossible. It is no exaggeration to say that private enterprise rests on public foundations.