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Law and Long-Term Economic Change

Stanford University Press

Contents

List of Figures.............................................................................................................................................................viiList of Tables..............................................................................................................................................................ixContributors................................................................................................................................................................xi1. Law and Long-Term Economic Change: An Editorial Introduction Debin Ma and Jan Luiten van Zanden.........................................................................12. The Evolution of Law: Political Foundations of Private Law in Medieval Europe and Japan John O. Haley...................................................................193. Law and Economy in Traditional China: A "Legal Origin" Perspective on the Great Divergence Debin Ma.....................................................................464. Property Rights, Land, and Law in Imperial China Mio Kishimoto..........................................................................................................685. Contracts, Property, and Litigation: Intermediation and Adjudication in the Huizhou Region (Anhui) in Sixteenth-Century China Harriet T. Zurndorfer.....................916. Law and Economic Change in India, 1600–1900 Tirthankar Roy........................................................................................................1157. Land and Law in Colonial India Anand V. Swamy...........................................................................................................................1388. The Political Economy of Law and Economic Development in Islamic History Metin M. Cosgel................................................................................1589. Islamic Legal Institutions of Contracts and Courts: A Comparative Perspective Toru Miura................................................................................17810. Bankruptcy Laws: East versus West Jérôme Sgard...............................................................................................................19811. Debt Litigation in Medieval Holland, 1200–1350 Jessica Dijkman...................................................................................................22112. The Resolution of Commercial Conflicts in Bruges, Antwerp, and Amsterdam (1250–1650) Oscar Gelderblom............................................................24413. The Portuguese Judicial System in the Nineteenth Century: Rules, Risks, and Judges Jaime Reis..........................................................................27714. The Evolution of Self- and State Regulation of the London Stock Exchange, 1688–1878 Larry Neal...................................................................30015. British Legal Institutions and Transaction Costs in the Early Transport Revolution Dan Bogart..........................................................................323Index.......................................................................................................................................................................343

Chapter One

Debin Ma and Jan Luiten van Zanden

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"LEGAL ORIGIN": A GLOBAL PERSPECTIVE

Property rights and contract enforcement lie at the heart of sustainable economic growth. During the past decade, our understanding of the historical evolution of various institutional mechanisms to cope with this issue has been greatly enhanced by the voluminous research under the broad category of new institutional economics. The research demonstrates that these mechanisms, whether informally organized through repeated interaction of economic agents or formally institutionalized in a state-backed legal system, were central to the securing of property rights and contract enforcement (see, for example, North, 1981; Acemoglu et al., 2001, 2005; and Greif, 2006).

The importance of formal law and legal institution to economic growth has long been noted. The unique features of legal formalism and rule of law embedded in Western law—as argued by Max Weber—have laid the foundation of Western capitalism (Trubek, 1972). The role of law in economic growth resurfaced in recent scholarship on economic growth as exemplified by the highly influential debates on law and finance (La Porta et al., 1998, 1999) and legal origins (Glaeser and Schleifer, 2002). Yet curiously, in this new law and growth literature, the old Weberian interest in legal traditions around the world had largely been forsaken for a much narrower focus on Western Europe an legal regimes only, namely, common versus civil laws. The widely popular exercise of cross-country growth regressions—cross-country intended to cover most, if not all, the countries—reduces the world legal regimes to the dummy variable of common versus civil law as casual variable to explain differential national growth rates. Even adding in the finer subdivisions of civil law regimes—that is, the Scandinavian, Germanic, French, and Spanish legal traditions—this literature could not make up for the neglect of other vastly important non-Western legal traditions, such as Hindu, Islamic, Confucian, and other systems that had been the focus of intellectual attention of scholars like Weber who, at his time, possessed neither the means to trot the globe nor the tools to run two or four million regressions.

Can one justify the reduction of our global legal traditions to two Europe an legal origins due to the spread of Europe an colonialism? Not quite: the Western victory in the "legal" battle is far from over. Non-Western legal traditions continue to form the mainstream of the legal systems in a large part of the developing world today; the operation of Islamic law in many Middle Eastern countries is a case in point. Even for those that have nominally adopted Western legal regimes, indigenous legal traditions are still predominant often under the garb of Western legal lexicon. More important, there is other scholarship on the so-called order beyond or without law that emphasizes the importance of informal norms and rules as a means of supporting exchange and contract enforcement under conditions of economic agents' repeated interaction given a long-term horizon (Greif, 2006). Thus, by simplifying the whole world into two Europe an legal regimes, we misspecify our model by attributing either too much credit or too much blame for the economic success and failures of the developing world in the non-West. While we give due credit and full recognition to the importance of measurement and quantification, the strict adherence to this methodology as sometimes pursed in the "New Economic History" of the 1960s and 1970s and the recent craze in development economics with econometrically identifiable "exogeneity" (or one-way causality) or randomized experiments could contribute to an overtly short-term and restrictive view of long-term economic change. More important, this short-term orientation led to the neglect of long-term evolutionary dynamics...