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Solomon’s Knot: How Law Can End the Poverty of Nations

Author

Listed:
  • Robert D. Cooter

    (University of California, Berkeley)

  • Hans-Bernd Schäfer

    (Bucerius Law School, Hamburg, Germany)

Abstract

Sustained growth depends on innovation, whether it's cutting-edge software from Silicon Valley, an improved assembly line in Sichuan, or a new export market for Swaziland's leather. Developing a new idea requires money, which poses a problem of trust. The innovator must trust the investor with his idea and the investor must trust the innovator with her money. Robert Cooter and Hans-Bernd Schäfer call this the "double trust dilemma of development." Nowhere is this problem more acute than in poorer nations, where the failure to solve it results in stagnant economies. In Solomon's Knot, Cooter and Schäfer propose a legal theory of economic growth that details how effective property, contract, and business laws help to unite capital and ideas. They also demonstrate why ineffective private and business laws are the root cause of the poverty of nations in today's world. Without the legal institutions that allow innovation and entrepreneurship to thrive, other attempts to spur economic growth are destined to fail.

Suggested Citation

  • Robert D. Cooter & Hans-Bernd Schäfer, 2013. "Solomon’s Knot: How Law Can End the Poverty of Nations," Economics Books, Princeton University Press, edition 1, number 9540.
    • Handle: RePEc:pup:pbooks:9540
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    Citations

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    Cited by:

    1. Ding Chen & Simon Deakin & Mathias Siems & Boya Wang, 2016. "Law, Trust & Institutional Change in China: Evidence from Qualitative Fieldwork," Working Papers wp485, Centre for Business Research, University of Cambridge.
    2. Ding Chen & Simon Deakin, 2014. "On Heaven's Lathe: State, Rule of Law, & Economic Development," Working Papers wp464, Centre for Business Research, University of Cambridge.
    3. Semen Son Turan, 2015. "Stakeholders in Equity-Based Crowdfunding: Respective Risks Over the Equity Crowdfunding Lifecycle," Journal of Financial Innovation, IBRIF - Instituto Brasileiro de Inovação Financeira, vol. 1(2), pages 1-6.

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