Jeune Street

William Easterly points to a paper by Dr Kevin Davis, which looks at the relationship between the rule of law and development. The prevailing wisdom in development policy right now is that a strong legal system that protects and enforces property rights is a necessary condition for economic development. Davis's review of the research on this relationship shows a more murky connection between the law and development (in Easterly's words):

Two current measures of “rule of law” used by economists in “institutions cause development” econometric research are by their own description a mixture of some characteristics of the legal system with a long list of non-legalistic factors such as “popular observance of the law,” “a very high crime rate or if the law is routinely ignored without effective sanction (for example, widespread illegal strikes),” “losses and costs of crime,” “corruption in banking,” “crime,” “theft and crime,” “crime and theft as obstacles to business,” “extent of tax evasion,” “costs of organized crime for business” and “kidnapping of foreigners.” Showing that this mishmash is correlated with achieving development tells you what exactly? Hire bodyguards for foreigners?

What's missing in the recognition that law is not a technical fix. Better trained judges, better designed constitutions, and more effective Parliaments, do not in themselves create a democratic and progressive polities. A society governed by rules (that are hopefully just) requires a much deeper internalization of what the rules are, and the widespread will to follow them. In other words, people have to want to do what is right even when no one is looking. The pervasive threat of enforcement is not strong enough to hold a society together, even if it may be enough to start businesses more easily.