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The Emergence of the London Stock Exchange as a Self-Policing Club, Edward Stringham George Mason University

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nirgrahamUK Posted: Mon, Sep 28 2009 5:47 PM

 

May be of interest to historians of liberty like laughing-man and lilburne,
and to those people interested in the economics and history of private production of law and enforcement

http://www.biblioteca.ufm.edu.gt/apee/pdf/999610.pdf.

 

Conclusion

< Although there may be good reason to worry that in a
complicated stock market there are greater chances of fraud, it seems
clear that there was no missing market in this realm. Rather than
relying on public regulation to enforce contracts, brokers consciously
found a way to solve this dilemma by creating and enforcing a system
of private rules. Since it was their goal to promote trade, the interest
of the members was aligned with the interest of its customers. It was
their ability to experiment and their need to attract business that
allowed for the discovery of better ways of organizing and selfregulating.
Under laissez faire, firms and clubs, such as the London
Stock Exchange, can choose to organize in any way they wish, and
those thatfind successful ways of operating will flourish.18 Since the London
Stock Exchange did not have a legal monopoly, it needed to make
sure that its existence was beneficial. Dennis Carlton writes, AIt is
useful to view exchanges as competing (or potentially competing)
with each other. As in other markets, competition is a substitute for
regulation. The more competition there is, the more likely it is that
exchanges themselves will promulgate rules and regulations that
benefit and protect consumers in much the same ways as competition
in other markets protects consumers@ (Carlton, 1984:259). When
exchanges are free to organize without government regulation it
allows for the discovery process of the market to operate. In their
quest for more profits, brokers will have the incentive to discover
better ways of self-policing. The evolution of the London Stock
Exchange provides evidence that beneficial regulations can be created
through the market.

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

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It's a shame this isn't getting much attention, it's a really good recommendation.

Other Stringham papers of interest: here and here. There's more over at his webpage for anybody interested.

"You don't need a weatherman to know which way the wind blows"

Bob Dylan

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