By applying self-interest and rational choice to government, public choice reasserted that government agents are not angels. However, many economists still tend to assume that the rules of the free market are enforced exogenously. How can the rules of the free market be enforced exogenously when the enforcers are self-interested?
At the same time, the argument that markets can *create* trust endogenously merely via reputational markets is self-defeating. Avoiding reputational costs is not the same thing as self-policing via the rules of the game. Rather, avoiding reputational costs is parasitic on other agents–whether governmental or non-governmental–who embrace and enforce the rules of the game. Likewise, reputational markets already assume markets–that is, they already assume the enforcement of the rules of the game. Appealing to reputational markets merely pushes the onus for embracing and enforcing the rules of the game onto other agents.
What compels these other agents to embrace and enforce the rules of the game? If the answer is merely reputational markets, then the argument is viciously circular. It evades the question of who ultimately embraces and enforces the rules of the game. It is also self-defeating because it encourages the myth that all market agents act merely in their own unbridled self-interest rather than police themselves and others according to the rules of the game. It also encourages the idea that agents outside the market need to preserve and enforce the rules of the game.
Perhaps the greatest challenge for general praxeology (interdisciplinary social science) and rational choice theory–especially comparative political economy–is to discover what set of institutional arrangements best *preserves* pre-existing social capital–that is, trust via commitment to the rules of the game–as well as how such arrangements can be made manifest. The Holy Grail for the social sciences is to understand how to bring about eternal life for widespread commitment to the rules of the game. Unfortunately, how social capital itself first emerges will probably always remain a mystery. Moreover, because it is an empirical question dependent on context, time, and place, how to move from the status quo to a better society will always elude mere theory.