Institutions Friendly to Commerce: In Today’s Jargon, “Ease of Doing Business”

The widely cited annual publication of the World Bank, The Doing Business Report, today stands as the standard reference for both the practical methodology and actual measurement of the degree to which a country’s market-related institutions are friendly to doing business. Since the mid-1990s it has developed quantitative indicators of the “ease of doing business” (EDB) using both direct objective measures such as number of days to register a new business, plus subjective assessments by many economic agents on how fair laws and courts are to small business compared to large ones, and so on. Such indicators are not available for earlier periods of course, and so far economic historians have not undertaken efforts to compile analogous data for earlier centuries, due to severe data limitations. However, we have been able to utilize the broad concepts of such indicators to cull from the secondary literature — as done in Part II of the book for economic activity proxies — a surprisingly large amount of quantitative measures related to legal procedures. In this chapter we provide a limited but indicative set of data on contract enforcement and bankruptcy procedures in Ragusa, while Chapter 11 does this for the coverage, speed, and effectiveness of both civil and commercial court procedures. The rest of the chapter first covers the contract enforcement date, then gives a more qualitative view of the favourable business climate as far back as the 13th century, and finally discusses some writings of the time that reflect very sophisticated intellectual views of entrepreneurship, theoretical concepts of the interest rate, and a deep understanding of what the NIE literature today contends: “good institutions matter for promoting economic growth and prosperity.”