We build a model to investigate the interaction between trade, the supply of law and order, and the nature of governing political institutions. To supply law and order necessary for a representative merchant to create wealth, a ruler (i) appoints officials capable of coercion and (ii) introduces a system of taxation. When potential gains from trade are important, the demand for law and order is high but appointing numerous officials capable of coercion may pave the way to arbitrary and distortive expropriation. Delegating the task of appointing officials to the better-informed merchant lowers the cost of sustaining good market institutions, but exacerbates the latter's temptation to escape taxation. When gains from trade are instead low delegation never occurs. Our theory provides a rationale for the case of post-Norman Conquest England (1066-1307) where, in parallel with the rise of trade, kings increasingly give in to the citizens' desire of self-governance by granting Charters of Liberties.
Thursday, November 7, 2013
Law, Order, and Trade in Medieval English Towns
Posted by Dan Ernst
Charles Angelucci, Harvard University, Department of Economics, and Simone Meraglia, University of Toulouse 1 - Toulouse School of Economics (TSE); New York University (NYU), have posted Trade, Self-Governance, and the Provision of Law and Order, with an Application to Medieval English Chartered Towns. Here is the abstract: