On the Evolution of Collective Enforcement Institutions: Communities and Courts
44 Pages Posted: 5 Mar 2011 Last revised: 19 Jul 2016
Date Written: February 13, 2014
We analyze the capacities of communities (or social networks) and courts to secure cooperation among heterogeneous, impersonal transactors. We find that communities and courts are complementary in that they tend to support cooperation for different types of transactions but that the existence of courts weakens the effectiveness of community enforcement. Our findings are consistent with the emergence of the medieval Law Merchant and its subsequent supersession by state courts as changes in the costs and risks of long-distance trade, driven in part by improvement in shipbuilding methods, altered the characteristics of merchant transactions over the course of the Commercial Revolution in Europe. We then contrast the European experience with the evolution of enforcement institutions in Asia over the same period.
Keywords: Institutions, Contract Enforcement, Communities, Courts, Social Networks, Law Merchant, Lex Mercatoria, Commercial Revolution
JEL Classification: D02, D71, N43, P48
Suggested Citation: Suggested Citation