Institutions, History, and Economic Development

Abstract

To gain insight into how the developing world can attain the Rule of Law and thereby further economic development, a good place to start is to ask how countries in today's developed world did so. Western Europe, for example, did not enjoy the Rule of Law in the Middle Ages but successfully achieved it over a number of centuries, at least in the economic sphere of enforcing contracts and protecting property rights. The events in England culminating in the Glorious Revolution illustrate the importance of legal institutions and, especially, of public law. The private law of contract and property were not sufficient. The problem of the predatory ruler had to be overcome, and England did so by vesting control in Parliament over the King's revenues from public sources and his expenditures and by assuring the independence of the judiciary. The French revolution, in contrast, resulted in high quality unified private substantive law under the Napoleonic codes, but the public law system suffered from the subordination of the role of the judiciary.

Keywords: institution, economic development, rule of law, public market, bazaar, quid, quo, Middle Ages, ex post opportunism, Norman, Westminster, guild, merchant guild, Hansa, Hanseatic League, Boycott, Reputation, Maghribi, law merchant, private law, private tribunal, long distance trade, nation state