Economic Theory of the State

Abstract As a concept, “the economic theory of the state” relates to at least three broad questions. The first concerns the emergence of the state. Historians and economic historians have long tried to unveil the origin of the state. Marxist or neo-Marxist theories of the state, in contrast, ask how the state functions as a tool for the ruling class to protect and to advance its interests. Taking off from the insight that the structure of society affects economic performance, the third question concerns what role the state plays in this structure. We focus on this third question and survey three broad approaches to answering it: the laissez-faire approach, the public goods approach, and the property rights approach.