On the Evolution of Collective Enforcement Institutions: Communities and Courts
AbstractImpersonal exchange has been a major driver of economic development. But transactors with no stake in maintaining an ongoing relationship have little incentive to honor deals. Therefore, all economies have developed institutions to support honest trade and realize the gains of impersonal exchange. We analyze the relative capacities of communities (or social networks) and courts to secure cooperation among heterogeneous, impersonal transactors. Our main finding is that communities and courts are complements: They support cooperation in different types of transactions. We apply our results to the rise and fall of a medieval enforcement institution, the Law Merchant, concluding that progressive reductions in the risks and costs of transportation over long distances, driven in part by improvements in shipbuilding methods, increased first the value and then the composition of long-distance trade in ways that initially favored and later undermined this institution.
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Bibliographic InfoPaper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2011-017.
Date of creation: 2011
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Institutions; Contract Enforcement; Communities; Courts; Social Networks; Law Merchant; Lex Mercatoria; Commercial Revolution.;
Other versions of this item:
- Masten, S.E. & Prüfer, J., 2011. "On the Evolution of Collective Enforcement Institutions: Communities and Courts," Discussion Paper 2011-074, Tilburg University, Center for Economic Research.
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- N43 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: Pre-1913
- P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
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