[C]ultures are portfolios of property rights. The composition of, and distribution of those property rights, varies from culture to culture. In each culture, those rights are expressed as norms. Property rights themselves are a norm. Those property rights perpetuated by norms may be more or less beneficial than other portfolios of property rights.
But any idiot who thinks that (a) formal institutions don’t matter – such as libertarians or (b) that formal institutions are sufficient – such as progressives, will have history prove him wrong to the chagrin of the people who understand (c) that norms are a form of property – conservatives. Norms are a commons that we all pay for. The tax we pay for them with is forgone opportunity to consume them, and absorbing the risk that no others will absorb them too.
Aristocratic Egalitarian Culture (The West) prohibits not just fraud, theft and violence, but the more deceptive versions of fraud: profit from asymmetry of knowledge, and profit from involuntary transfer via externalities.
Market competition itself, is an involuntary transfer via externality from people outside of the exchange (competitors). This is why humans naturally object to it, and must be trained to respect and practice competition. But this externality provides instruction and incentive to all in the market, such that we all seek greater variety and lower cost of production. It produces beneficial ends. But it is non-trivial to create the norm of respecting and practicing competition. That’s why so few cultures did it.
[R]othbard was wrong. The market isn’t sufficient to maintain the norms against fraud theft and violence, and certainly not against externalities. The marginal impact of reputation in the market is lower than the marginal impact of fraud. That’s why only the west developed the high trust society – by out-breeding such that the entire nation to be an extended family – at least within it’s social classes. Without excessive out-breeding that destroyed the perception of extended family through common physical properties, and common normative behavior. In order to retain the sense of extended family, both physical properties and normative properties must be similiar enough that signaling is consisten within the group, and only class (selection quality) within the extended family differentiates between group members.
Trust. The extension of familial trust to all possible exchange partners, by prohibitions on externality and asymmetry, when backed by warranty, is the composition that creates the high – trust society. Only AFTER these informal institutions are enforced by formal institutions, even if only the formal institution of the common law, will trust develop. And with trust, the velocity of trade that makes extraordinary marginal wealth possible for a group, because that group is more competitive than other groups.