Hostname: page-component-586b7cd67f-t8hqh Total loading time: 0 Render date: 2024-11-30T15:22:04.310Z Has data issue: false hasContentIssue false
  • English
  • Français

The fundamental Coase of development: property rights foundations of the effective state

Published online by Cambridge University Press:  17 June 2020

Ennio E. Piano  and
Alexander W. Salter
Ennio E. Piano*
Affiliation:
Middle Tennessee State University, Murfreesboro, TN, USA
Alexander W. Salter
Affiliation:
Texas Tech University, Lubbock, TX, USA
*
*Corresponding author. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper identifies political property rights and jurisdictional rivalry as two important mechanisms that drive political and economic development. After developing a general framework to explain relative performance in the ‘market for governance’, we argue that Western Europe during the High Middle Ages presented initial conditions conducive to the development of effective states. We extend the framework by analyzing city-state governance in Renaissance Italy, as well as public finance practices in early modern Germany. We conclude by discussing the implications of our argument for the literature on state capacity and economic development. The takeaway is that well-aligned political property rights and competition in the provision of governance services can promote the protective and productive state while forestalling the predatory state.

Keywords

Political property rightspolycentricitystate capacityWestern European development
Type
Research Article
Information
Journal of Institutional Economics , Volume 17 , Issue 1 , February 2021 , pp. 37 - 52
Copyright
Copyright © Millennium Economics Ltd 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abramson, S. F. (2017), ‘The Economic Origins of the Territorial State’, International Organization, 71(1): 97–130.CrossRefGoogle Scholar
Acemoglu, D. (2003), ‘Why Not a Political Coase Theorem? Social Conflict, Commitment, and Politics’, Journal of Comparative Economics, 31(4): 620–652.CrossRefGoogle Scholar
Acemoglu, D. and Robinson, J. A. (2005), Economic Origins of Dictatorship and Democracy, Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Acemoglu, D. and Robinson, J. A. (2012), Why Nations Fail: The Origins of Power, Prosperity, and Poverty, New York, USA: Broadway Business.Google Scholar
Acemoglu, D. and Robinson, J. A. (2019), The Narrow Corridor: States, Societies, and the Fate of Liberty, New York: Penguin Press.Google Scholar
Acemoglu, D., Moscona, J. and Robinson, J. A. (2016), ‘State Capacity and American Technology: Evidence from the Nineteenth Century’, American Economic Review, 106(5): 61–67.CrossRefGoogle Scholar
Albrecht, B. C., Hendrickson, J. R. and Salter, A. W. (2018), ‘Evolution, Uncertainty, and the Asymptotic Efficiency of Policy’, Working Paper.CrossRefGoogle Scholar
Alchian, A. A. (1950), ‘Uncertainty, Evolution, and Economic Theory’, Journal of Political Economy, 58(3): 211–221.CrossRefGoogle Scholar
Aligica, P. and Tarko, V. (2013), ‘Co-Production, Polycentricity, and Value Heterogeneity: The Ostroms’ Public Choice Institutionalism Revisited’, American Political Science Review, 107(4): 726–741.CrossRefGoogle Scholar
Allen, D. W. (1991). ‘What are Transaction Costs’, Research in Law and Economics, 14(1): 1–18.CrossRefGoogle Scholar
Allen, D. W. (1995), ‘Order in the Church: A Property Rights Approach’, Journal of Economic Behavior & Organization, 27(1): 97–117.CrossRefGoogle Scholar
Allen, D. W. (2011). The Institutional Revolution: Measurement and the Economic Emergence of the Modern World, Chicago, USA: The University of Chicago Press.CrossRefGoogle Scholar
Allen, D. W. (2002), ‘The Rhino's Horn: Incomplete Property Rights and the Optimal Value of an Asset’, The Journal of Legal Studies, 31(S2): S339–S358.CrossRefGoogle Scholar
Backhaus, J. and Wagner, R. E. (1987), ‘The Cameralists: A Public Choice Perspective’, Public choice, 53(1): 3–20.CrossRefGoogle Scholar
Barzel, Y. (1997), Economic Analysis of Property Rights, Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Barzel, Y. (2002), A Theory of the State: Economic Rights, Legal Rights, and the Scope of the State, Cambridge, UK: Cambridge University Press.Google Scholar
Batchelder, R. W. and Sanchez, N. (2013), ‘The Encomienda and the Optimizing Imperialist: An Interpretation of Spanish Imperialism in the Americas’, Public Choice, 156(1–2): 45–60.CrossRefGoogle Scholar
Benecke, G. (1971), ‘Ennoblement and Privilege in Early Modern Germany’, History, 56(188): 360–370.CrossRefGoogle Scholar
Besley, T. and Persson, T. (2009), ‘The Origins of State Capacity: Property Rights, Taxation, and Politics’, American Economic Review, 99(4): 1218–1244.CrossRefGoogle Scholar
Besley, T. and Persson, T. (2010), ‘State Capacity, Conflict, and Development’, Econometrica, 78(1): 1–34.Google Scholar
Bowsky, W. M. and Bowsky, W. M. (1981), A Medieval Italian Commune: Siena Under the Nine, 1287–1355. University of California Press.Google Scholar
Broadberry, S. and Gupta, B. (2006), ‘The Early Modern Great Divergence: Wages, Prices and Economic Development in Europe and Asia, 1500–1800’, The Economic History Review, 59(1): 2–31.CrossRefGoogle Scholar
Buchanan, J. M. (2000), The Limits of Liberty: Between Anarchy and Leviathan, Indianapolis, USA: Liberty Fund.Google Scholar
Caplan, B. (2001). ‘Rational Irrationality and the Microfoundations of Political Failure.’ Public Choice, 107(3–4): 311–331.CrossRefGoogle Scholar
Cervellati, M., Lazzaroni, S., Prarolo, G. and Vanin, P. (2019), ‘Political Geography and Pre-Industrial Development: A Theory and Evidence for Europe 1000–1850’, Working Paper.Google Scholar
Cheung, S. N. (1974), ‘A Theory of Price Control’, The Journal of Law and Economics, 17(1): 53–71.Google Scholar
Coase, R. H. (1960), ‘The Problem of Social Cost’, The Journal of Law and Economics, 3(1): 1–69.CrossRefGoogle Scholar
Contamine, P. (1986), War in the Middle Ages, Hoboken: Blackwell Publishing.Google Scholar
Cox, G. W. (2017), ‘Political Institutions, Economic Liberty, and the Great Divergence’, The Journal of Economic History, 77(3): 724–755.CrossRefGoogle Scholar
Day, W. R. (2000), The early development of the Florentine economy, c. 1100–1275, Doctoral dissertation, London School of Economics and Political Science.Google Scholar
De Lara, Y. G. (2008), ‘The Secret of Venetian Success: A Public-Order, Reputation-Based Institution’, European Review of Economic History, 12(3): 247–285.CrossRefGoogle Scholar
DeLong, J. B. and Shleifer, A. (1993), ‘Princes and Merchants: European City Growth Before the Industrial Revolution’, The Journal of Law and Economics, 36(2): 671–702.CrossRefGoogle Scholar
Denzel, M. A. (2006), ‘State and Finance in the Holy Roman Empire from c. 1650 to c. 1800, a Survey’, Working Paper.Google Scholar
De Soto, H. (2000), The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, New York, USA: Basic Civitas Books.Google Scholar
Dincecco, M. (2015), ‘The Rise of Effective States in Europe’, The Journal of Economic History, 75(3): 901–918.CrossRefGoogle Scholar
Dincecco, M. and Prado, M. (2012), ‘Warfare, Fiscal Capacity, and Performance’, Journal of Economic Growth, 17(3): 171–203.CrossRefGoogle Scholar
Edwards, J. and Ogilvie, S. (2012), ‘What Lessons for Economic Development can we Draw From the Champagne Fairs?’, Explorations in Economic History, 49(2): 131–148.CrossRefGoogle Scholar
Ekelund, R. B. and Tollison, R. D. (1981), Mercantilism as a Rent-Seeking Society: Economic Regulation in Historical Perspective, College Station, USA: Texas A & M University Press.Google Scholar
Epstein, S. (1999), ‘Urban Society’, in Abulafia, D. (ed.), The New Cambridge Medieval History, Cambridge, UK: Cambridge University Press, pp. 26–37.CrossRefGoogle Scholar
Federico, G. and Malanima, P. (2004), ‘Progress, Decline, Growth: Product and Productivity in Italian Agriculture, 1000–2000’, The Economic History Review, 57(3): 437–464.CrossRefGoogle Scholar
Fink, A. (2012), ‘The Hanseatic League and the Concept of Functional Overlapping Competing Jurisdictions’, Kyklos, 65(2): 194–217.CrossRefGoogle Scholar
Ganshof, F. L. (1996), Feudalism, Toronto, Canada: University of Toronto Press.Google Scholar
Geloso, V. and Salter, A. W. (2020), ‘State Capacity and Economic Development: Causal Mechanism or Correlative Filter?’, Journal of Economic Behavior and Organization, 170(1), 372–385.CrossRefGoogle Scholar
Grassi, D. and Memoli, V. (2016), ‘Political Determinants of State Capacity in Latin America’, World Development, 88(1): 94–106.CrossRefGoogle Scholar
Green, L. (1999), ‘Florence’, in Abulafia, D. (ed.), The New Cambridge Medieval History, Cambridge, UK: Cambridge University Press, pp. 479–497.CrossRefGoogle Scholar
Greif, A. (1994), ‘On the Political Foundations of the Late Medieval Commercial Revolution: Genoa During the Twelfth and Thirteenth Centuries’, The Journal of Economic History, 54(2): 271–287.CrossRefGoogle Scholar
Hansen, M. H. (Ed.). (2000), A Comparative Study of Thirty City-state Cultures: An Investigation. Kgl. Danske Videnskabernes Selskab.Google Scholar
Hayek, F. A. (1945), ‘The use of knowledge in society’, The American Economic Review, 35(4): 519–530.Google Scholar
Hendrickson, J. R., Salter, A. W. and Albrecht, B. C. (2018), ‘Preventing Plunder: Military Technology, Capital Accumulation, and Economic Growth’, Journal of Macroeconomics, 58(1): 154–173.CrossRefGoogle Scholar
Housley, N. (1999), ‘European Warfare, c. 1200–1320’, in Keen, M. (ed.), Medieval Warfare: A History, Oxford, UK: Oxford University Press, pp. 113–135.Google Scholar
Isenmann, E. (1999), ‘The Holy Roman Empire in the Middle Ages’, in Bonney, R. (ed.), The Rise of the Fiscal State in Europe c. 1200–1815. Oxford, UK: Clarendon Press, pp. 243–278.CrossRefGoogle Scholar
Johnson, H. C. (1975), Frederick the Great and his Officials, New Haven, USA: Yale University Press.Google Scholar
Johnson, N. D. and Koyama, M. (2014), ‘Tax Farming and the Origins of State Capacity in England and France’, Explorations in Economic History, 51(1): 1–20.CrossRefGoogle Scholar
Johnson, N. D. and Koyama, M. (2017), ‘States and Economic Growth: Capacity and constraints’, Explorations in Economic History, 64(1): 1–20.CrossRefGoogle Scholar
Jones, P. (1997), The Italian City-State: From commune to Signoria, Oxford, UK: Clarendon Press.Google Scholar
Jouvenel, B. (1993), On Power: The Natural History of its Growth, Indianapolis, US: Liberty Fund.Google Scholar
Kallioinen, M. (2017), ‘Inter-Communal Institutions in Medieval Trade’, The Economic History Review, 70(4): 1131–1152.CrossRefGoogle Scholar
Kamen, H. (1968), ‘The Economic and Social Consequences of the Thirty Years’ War’, Past & Present, 39(1): 44–61.CrossRefGoogle Scholar
Kurrild-Klitgaard, P. and Svendsen, G. T. (2003), ‘Rational Bandits: Plunder, Public Goods, and the Vikings’, Public Choice, 117(3–4): 255–272.CrossRefGoogle Scholar
Lee, W. R. (1975), ‘Tax Structure and Economic Growth in Germany (1750–1850)’, Journal of European Economic History, 4(1), 153–174.Google Scholar
Levy, J. T. (2014), Rationalism, Pluralism, and Freedom, Oxford, UK: Oxford University Press.CrossRefGoogle Scholar
Libecap, G. D. (1993). Contracting for Property Rights, Cambridge, UK: Cambridge University Press.Google Scholar
Lopez, R. S. (1976), The Commercial Revolution of the Middle Ages, 950–1350, Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Magnusson, L. (2017), Mercantilism and Cameralism, London, UK: Routledge.Google Scholar
Malanima, P. (1998), ‘Italian Cities 1300–1800. A Quantitative Approach’, Rivista di Storia Economica, 14(2): 91–126.Google Scholar
Malanima, P. (2003), ‘Measuring the Italian Economy, 1300–1861’, Rivista di Storia Economica, 19(3): 265–296.Google Scholar
Malanima, P. (2009), ‘Decline or Growth? European Cities and Rural Economies,’ Zwischen Land und Stadt, Jahrbuch für Geschichte des ländlichen Raumes, 6(1): 18–44.Google Scholar
Martines, L. (1988), Power and Imagination: City-States in Renaissance Italy, London, UK: Taylor & Francis.Google Scholar
Moselle, B. and Polak, B. (2001), ‘A Model of a Predatory State’, Journal of Law, Economics, and Organization, 17(1): 1–33.CrossRefGoogle Scholar
Munger, M. C. (2019), ‘Tullock and the Welfare Costs of Corruption: There is a “Political Coase Theorem”’, Public Choice, 181(1–2): 83–100.CrossRefGoogle Scholar
Muralidharan, K., Niehaus, P. and Sukhtankar, S. (2016), ‘Building State Capacity: Evidence from Biometric Smartcards in India’, American Economic Review, 106(10): 2895–2929.CrossRefGoogle Scholar
Murtazashvili, I. and Murtazashvili, J. (2016), ‘When Does the Emergence of a Stationary Bandit Lead to Property Insecurity?’, Rationality and Society, 28(3): 335–360.CrossRefGoogle Scholar
Murtazashvili, J. and Murtazashvili, I. (2019), ‘Wealth-Destroying States’, Public Choice, forthcoming.CrossRefGoogle Scholar
Najemy, J. M. (2008), A History of Florence, 1200–1575, Hoboken, USA: John Wiley & Sons.Google Scholar
Niskanen, W. Jr. ([1971] 2007), Bureaucracy and Representative Government, Piscataway, USA: Aldine Transaction.Google Scholar
North, D. C. (1979), ‘A Framework for Analyzing the State in Economic History’, Explorations in Economic History, 16(3): 249–259.CrossRefGoogle Scholar
North, D. C., Wallis, J. J. and Weingast, B. R. (2009), Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History, Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Norwich, J. J. (2003), A History of Venice, London, UK: Penguin.Google Scholar
Nunn, N. (2009), ‘The Importance of History for Economic Development’, Annual Review of Economics, 1(1): 65–92.CrossRefGoogle Scholar
Olson, M. (1993), ‘Dictatorship, Democracy, and Development’, American Political Science Review, 87(3): 567–576.CrossRefGoogle Scholar
Olson, M. (1995), ‘Why the Transition from Communism is so Difficult’, Eastern Economic Journal, 21(4), 437–461.Google Scholar
Onis, Z. (1991), ‘The Logic of the Developmental State’, Comparative Politics, 24(1): 109–126.CrossRefGoogle Scholar
Ostrom, E. (2009), Understanding Institutional Diversity, Princeton, USA: Princeton University Press.CrossRefGoogle Scholar
Piano, E. E. (2019), ‘State Capacity and Public Choice: A Critical Survey’, Public Choice, 178(1–2): 289–309.CrossRefGoogle Scholar
Pierson, P. (2000), ‘Increasing Returns, Path Dependence, and the Study of Politics’, American Political Science Review, 94(2): 251–267.CrossRefGoogle Scholar
Rosenberg, N. and Birdzell, B. E. (2008), How the West Grew Rich: The Economic Transformation of the Industrial World, New York, USA: Basic Books.Google Scholar
Salter, A. W. (2015), ‘Rights to the Realm: Reconsidering Western Political Development’, American Political Science Review, 109(4): 725–734.CrossRefGoogle Scholar
Salter, A. W. (2016), ‘Post-Cameralist Governance: Towards a Robust Political Economy of Bureaucracy’, Economic Affairs, 36(3): 294–308.CrossRefGoogle Scholar
Salter, A. W. and Young, A. T. (2018), ‘Medieval Representative Assemblies: Collective Action and Antecedents of Limited Government’, Constitutional Political Economy, 29(2): 171–192.CrossRefGoogle Scholar
Salter, A. W. and Young, A. T. (2019), ‘Polycentric Sovereignty: The Medieval Constitution, Governance Quality, and the Wealth of Nations’, Social Science Quarterly, 100(4): 1241–1253.CrossRefGoogle Scholar
Schevill, F. (1909), Siena: The Story of Mediaeval Commune, New York, USA: Charles Scribner's Sons.Google Scholar
Shepsle, K. A. and Weingast, B. R. (1987), ‘The Institutional Foundations of Committee Power’, American Political Science Review, 81(1): 85–104.CrossRefGoogle Scholar
Skarbek, D. (2011), ‘Governance and Prison Gangs’, American Political Science Review, 105(4): 702–716.CrossRefGoogle Scholar
Stasavage, D. (2007), ‘Cities, Constitutions, and Sovereign Borrowing in Europe, 1274–1785’, International Organization, 61(3): 489–525.CrossRefGoogle Scholar
Stigler, G. J. (1992), ‘Law or Economics?’, The Journal of Law and Economics, 35(2): 455–468.CrossRefGoogle Scholar
Thrasher, J. and Vallier, K. (2018), ‘Political Stability in the Open Society’, American Journal of Political Science, 62(2): 398–409.CrossRefGoogle Scholar
Tiebout, C. M. (1956), ‘A Pure Theory of Local Expenditures’, Journal of Political Economy, 64(5): 416–424.CrossRefGoogle Scholar
Tilly, C. (1990), Coercion, Capital, and European States, AD 990, Cambridge, UK: Basil Blackwell.Google Scholar
Tullock, G. (2005), Bureaucracy, Indianapolis, USA: Liberty Fund.Google Scholar
Vahabi, M. (2016), ‘A Positive Theory of the Predatory State’, Public Choice, 168(3–4): 153–175.CrossRefGoogle Scholar
Volckart, O. (2000), ‘State-building by Bargaining for Monopoly Rents’, Kyklos, 53(3): 265–291.CrossRefGoogle Scholar
von Mises, L. (1944), Bureaucracy, New Haven, USA: Yale University Press.Google Scholar
Wagner, R. E. (2012), ‘The Cameralists: Fertile Sources for a New Theory of Public Finance’, in Backhaus, J. (ed.), Handbook of the History of Economic Though, New York, USA: Springer, pp. 123–135.CrossRefGoogle Scholar
Wilson, P. (2002), Absolutism in Central Europe, London, UK: Routledge.CrossRefGoogle Scholar
Wittman, D. (1989), ‘Why Democracies Produce Efficient Results.’ Journal of Political Economy, 97(6): 1395–1424.CrossRefGoogle Scholar
Young, A. T. (2016), ‘What Does it Take for a roving Bandit Settle Down? Theory and an Illustrative History of the Visigoths’, Public Choice, 168(1–2): 75–102.CrossRefGoogle Scholar
Young, A. T. (2018), ‘Hospitalitas: Barbarian Settlements and Constitutional Foundations of Medieval Europe’, Journal of Institutional Economics, 14(4): 715–737.CrossRefGoogle Scholar