The Rule of Law and the Wealth of Nations

In the latest edition of First Things , Reuven Brenner has a must-read article on our current fiscal predicament :

Fundamentals seem to cluster in foursomes. Classical alchemy had four elements, and classical medicine had four humors. Though it’s neither alchemy nor medicine, economics, too, turns out to have four elements that are helpful to think of when discussing remedies for restoring a country to health. In essence, it comes down to this: Restoration of economic health requires that risk capital and talent move from yesterday’s industries to tomorrow’s industries, and that someone must match them accountably.

There are four key terms that emerge from that statement: talent , capital , matchmakers , and accountability . Under normal conditions, venture-capital firms, banks, investment banks, leveraged-buyout firms, and asset-management firms make matches, offer risk capital, and bet on entrepreneurs or managers. The suppliers of capital also decide whether to terminate their investments or continue them when it takes longer than expected to bring such visions to life or when these visions turn out to be erroneous.