First Comes the Market, then Comes the Law

Earlier this week, I shared an excerpt from the February issue of The George Gilder Report.

I’m excited about this opportunity and eager to share it with you. I wanted to make sure you don’t miss out on your chance to secure a position in the e-commerce company that’s currently out pacing the Chinese economy.

Below, you’ll find another excerpt from the issue.

Keep scrolling…


Every practice, process, institution, or initiative that was crucial to a market economy was established in China by ordinary people, originally without government sanction and often while still explicitly illegal.

Even after reformers had been in power for years, it remained illegal for Chinese to move from one town to another without permission, change jobs without permission, build houses without permission.

Rent out extra space to a tenant? Absolutely illegal. Form a corporation, issue shares, pay out profits? Hey buddy, this a Communist country, capice?

In every single case, some ordinary Chinese citizens broke the law — and then thousands, and millions followed in their footsteps.

And in every case, only years later did the government grudgingly create some sort of legal accommodation.

The only alternative would have been to return whole regions, and hundreds of millions of people to abject poverty.

All the Chinese government’s newfound wealth, all its military might, all of the Belt and Road initiatives around the world are funded by markets that the government did not create, foresee, or even permit until it was too late to reverse them.

Surprised? We shouldn’t be. Governments have never created markets. They can’t.

Markets are information networks. And information, by definition, always comes as a surprise.

The more informative a market is, the more surprise flows through the arteries of commerce, the more information will be attracted to the network, and the stronger the market will become.

Even in the West this can be hard to remember.

Here is an experiment: Ask any sensible, reflective person (which excludes Marxist college professors) “what are the prerequisites of a healthy market economy?” Most people will put “the rule of law” in their top three.

It’s a very sensible answer. And it’s wrong.

The rule of law can’t be a “prerequisite,” because it does not come first. People create markets by buying and selling. The laws that govern markets come later.

In the beginning, markets must always rely on trust.

You can’t call a cop to enforce a transaction that’s not contemplated by the law.

When medieval merchants began to energize the European economy, there was essentially no mercantile law to guide them.

As Harold J. Berman observed in Law and Revolution, “The initial development of mercantile law was left largely… to the merchants themselves who organized international fairs and markets, formed mercantile courts and established mercantile offices in the new urban communities that were springing up throughout Western Europe.”

This way of thinking is what inspired the man behind the world’s greatest internet company.

And this company also happens to be our portfolio company of the month in The George Gilder Report

Click here to reveal the research behind this e-commerce giant.


George Gilder
Editor, Gilder’s Daily Prophecy

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George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology — and its impact on our lives.

He’s an established investor, writer, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

And he’s certainly no stranger to the financial newsletter...

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