The heyday of common law and privatized law which Nick spends so much time on was well before the 1500s and 1600s
By “privatized law”, you probably mean jurisdiction as property, which of course is no more in England or in any other country. But on his blog, he spends quite a bit of time explaining other aspects of common law which continue to apply to this day.
property rights & institutions were often as good or poor in various eras of China. This would suggest that they have small effects, but aren’t all that important in the long run.
This does not follow. Even if (as you suggest) property rights were “as good” in China as in England, there are many other features of a judicial system not captured by the phrase “country X had better property rights than country Y” that might have made a big difference. For example, starting around the time of the Glorious Revolution IIRC the English courts insisted that even the King of England had to pay his debts, as described in one of Nick’s blog posts, and I severely doubt that any court in China ever dared to rule against the Emperor of China in that way.
I have not read Farewell to Alms. Is not his thesis that the unparalleled economic success of England (and certain spinoffs from England, like the American colonies) in the 18th and 19th Centuries came from the fact that the English people had been subjected for a longer time than any other nation’s people to selection pressures for capital accumulation and success in capitalists enterprises in general. If not institutional differences, what if anything does Clark say created the earlier and longer selection pressures? Is it just that England, being an island, was invaded less often than territories on the Continent?
Anyway, to this day, the English-speaking countries, which, with the exception of India (which you can almost regard as a medium-sized English-speaking country inside a much larger country) are the only countries using common-law judicial systems, are better at creating wealth than any other countries, even thoroughly Westernized ones like France. I am of course not claiming that India is better at creating wealth than non-English-speaking Western countries. Average IQ is drastically lower in India than in any European country, and no choice of institutions could have conceivably overcome that handicap to economic performance. (Moreover, India’s judicial system departs from the English model in some ways, e.g., they have done away with juries.)
Correlation does not alway entail causation, but when a correlation between economic performance and whether the country used the English model for its judicial system persists for centuries, well, that’s evidence for causation in my book. Note that the scientific knowledge created by Newton, Hooke, Darwin, etc, were readily adopted by other nations (as was of course scientific knowledge created by other nations readily adopted by England) and the rest of the world was eager to adopt the methods of the industrial revolution (Germany being only 30 years behind England in industrialization, IIRC) but to this day, in France for example, what the French call “the Anglo-Saxon model” for governance and the economy is considered too harsh and inhumane for adoption in France. The only other feature of English society whose adoption is opposed strenuously in France is the English language, and I severely doubt that the English language is the cause of the superior economic performance of the English-speaking countries relative to France.
I readily concede that everything I wrote above is guesswork and could very easily be wrong. But given how important economic performance is (and given the potential for insights into the causes of superior economic performance to transfer to other domains of human effort, like creating better online conversations) guesswork is probably worth communicating, if the communication can be done in an honest, equivocal manner like I am trying to do here. It does not take much reading about the differences among judicial systems, and it does not take much experience with the operation of an actual judicial system (particularly if one manages or operates a business) to come to believe that the characteristics of the judical system tends to have a large effect on the economic performance of the community served by the judicial system.
A major thesis of Clark is that China at one time or another apparently had every condition or feature advanced to explain the sui generis Industrial Revolution, or that the advanced explanation fails on other grounds.
While neither you nor I can really speak to how much the Emperors respected debts in general, respecting debts and obligations in general is definitely in keeping with Confucian thought, and it’s not as if English kings were all that respecting, even in those early times when the king was weakest:
“1290: King Edward I (1272-1307) invaded Scotland and would put John de Balliol (1292-1296) on the Scottish throne. The Exchequer of the Jews, a small Jewish Community in England earned its living by lending money and lived under Royal protection. A large number of Knights is in debt to the Jews. The Jews foreclosed on the Knights land for failure to pay and sold it to recover their money. The King feared land would thereby accumulate in too few hands and challenge the Kings power base. Using this pretext the Jews in London and York are massacred and the Jewish ghettos sacked during the Baron wars. The remaining Jews are forced to France after being relieved of their possessions.”
Considering China’s long history of commercial expansion and innovation and great merchant fortunes, with financial instruments and arrangements not exceeded until the 1500s in Europe, if even then, it’s hard to think that China really suffered much from arbitrary and unjust laws.
Anyway, to this day, the English-speaking countries, which, with the exception of India (which you can almost regard as a medium-sized English-speaking country inside a much larger country) are the only countries using common-law judicial systems, are better at creating wealth than any other countries, even thoroughly Westernized ones like France.
Even including the Confucian countries like China & South Korea & Japan? Keep in mind that before the Lost Decade, Japan had a higher per capita than France (by almost $1000). And then there are other non-English-controlled countries like Argentina:
“Not so long ago Argentina really did seem ″doomed to success,″ to use a favorite rallying cry of Eduardo Duhalde, the country’s fifth president since December. Early in the 20th century this was the seventh richest country in the world, with a per capita income ahead of those of Canada, France, the Netherlands, Italy, Japan and Spain and not far behind that of the United States.”
The classic work on how property rights leads to wealth is still Adam Smith’s The Wealth of Nations, written at the start of the industrial revolution and in the middle of an agricultural revolution. England went from over 80% agricultural workers in 1870 to only 30% in 1800, freeing up labor for the industrial revolution; this occurred largely through capital investments in land improvements, for example draining, marl, and lime (http://www.bahs.org.uk/26n1a1.pdf). Smith captures well the legal changes going on, and that he saw as encouraging capital investment, such as the decline of the guilds, the replacement of primogeniture and the complex system of tenancies in land with alienable fee simple ownership, and the resultant enclosure movement, in which commons were replaced by single proprietor control of land.
Roughly speaking, Japan and the rest of East Asia converted to Roman law (the law of Western Europe outside of England) between the mid 19th (Japan) and mid 20th centuries. The process Smith describes was also a partial Romanization of English law into what we now know as the modern common law. So all countries to successfully industrialize have done so under variations of the Roman or English common law, and the English common law itself borrowed quite a bit from the Roman substantive law. (Contrast to Roman procedural law, which is awful, but that’s another story).
The interaction of the decline of political property rights with the industrial revolution is complicated. On the one hand, political corporations such as the East India Company and the West Indies and American colonies were very important to the British economy at that time. Overseas trade provided timber, cotton, and many other industrial inputs. On the other hand, the decline of political property rights in land led to the alienable ownership and the decline of the guilds that Smith and the new capitalists championed.
I particularly commend Book 3 Ch. 3 and Book 4 Ch. 7 of Wealth of Nations which cover much of this, albeit from Smith’s Romanist view. Sadly, most people never get past the famous Book 1.
East Asian institutions are hard to compare, first because their population may have an IQ advantage that makes up for institutional handicaps, and second because we don’t really know what they were: at least here in the West our knowledge of their old legal systems is extremely poor, and they underwent radical Westernization in the late 19th and 20th centuries. Clark’s genetic theory can’t explain why Britain declined so rapidly after about 1870 from being the leader in industrialization and a globe-straddling empire to being just another of dozens of medium-sized industrialized countries today. Political and legal developments, in particular the Reform movement, can, but that is a topic for another day.
Not up to your scholarly level, I don’t think. I’m largely going on the reading/research I did using De Roover and others to write http://en.wikipedia.org/wiki/Medici_Bank , where I was struck by the wretched subterfuges that merchants had to resort to and the general lack of sophistication, which struck me as quite different from Chinese systems with genuine fiat currency, undisguised interest, and general sophistication (there may’ve been Chinese insurance in there too, but I’ve forgotten any details of that).
Well, I’ve read a paper that supports a different perspective: usury laws were historically circumvented in the West and Middle East through clever use of (what we now call) the Put-Call Parity Theorem: any bonds that were issued were converted into a combination of puts, calls, and possibly rental contracts. This retains the substance of an interest-bearing loan, but without any explicit “interest payment” While the law might have been sophisticated, the resulting use of derivatives contracts was not.
The paper discusses the origin of mortgages in medieval England and the Middle East. It’s been a while since I read it, so I can’t summarize it, but I was shocked by their rather early trading of derivatives and options.
By “privatized law”, you probably mean jurisdiction as property, which of course is no more in England or in any other country. But on his blog, he spends quite a bit of time explaining other aspects of common law which continue to apply to this day.
This does not follow. Even if (as you suggest) property rights were “as good” in China as in England, there are many other features of a judicial system not captured by the phrase “country X had better property rights than country Y” that might have made a big difference. For example, starting around the time of the Glorious Revolution IIRC the English courts insisted that even the King of England had to pay his debts, as described in one of Nick’s blog posts, and I severely doubt that any court in China ever dared to rule against the Emperor of China in that way.
I have not read Farewell to Alms. Is not his thesis that the unparalleled economic success of England (and certain spinoffs from England, like the American colonies) in the 18th and 19th Centuries came from the fact that the English people had been subjected for a longer time than any other nation’s people to selection pressures for capital accumulation and success in capitalists enterprises in general. If not institutional differences, what if anything does Clark say created the earlier and longer selection pressures? Is it just that England, being an island, was invaded less often than territories on the Continent?
Anyway, to this day, the English-speaking countries, which, with the exception of India (which you can almost regard as a medium-sized English-speaking country inside a much larger country) are the only countries using common-law judicial systems, are better at creating wealth than any other countries, even thoroughly Westernized ones like France. I am of course not claiming that India is better at creating wealth than non-English-speaking Western countries. Average IQ is drastically lower in India than in any European country, and no choice of institutions could have conceivably overcome that handicap to economic performance. (Moreover, India’s judicial system departs from the English model in some ways, e.g., they have done away with juries.)
Correlation does not alway entail causation, but when a correlation between economic performance and whether the country used the English model for its judicial system persists for centuries, well, that’s evidence for causation in my book. Note that the scientific knowledge created by Newton, Hooke, Darwin, etc, were readily adopted by other nations (as was of course scientific knowledge created by other nations readily adopted by England) and the rest of the world was eager to adopt the methods of the industrial revolution (Germany being only 30 years behind England in industrialization, IIRC) but to this day, in France for example, what the French call “the Anglo-Saxon model” for governance and the economy is considered too harsh and inhumane for adoption in France. The only other feature of English society whose adoption is opposed strenuously in France is the English language, and I severely doubt that the English language is the cause of the superior economic performance of the English-speaking countries relative to France.
I readily concede that everything I wrote above is guesswork and could very easily be wrong. But given how important economic performance is (and given the potential for insights into the causes of superior economic performance to transfer to other domains of human effort, like creating better online conversations) guesswork is probably worth communicating, if the communication can be done in an honest, equivocal manner like I am trying to do here. It does not take much reading about the differences among judicial systems, and it does not take much experience with the operation of an actual judicial system (particularly if one manages or operates a business) to come to believe that the characteristics of the judical system tends to have a large effect on the economic performance of the community served by the judicial system.
A major thesis of Clark is that China at one time or another apparently had every condition or feature advanced to explain the sui generis Industrial Revolution, or that the advanced explanation fails on other grounds.
While neither you nor I can really speak to how much the Emperors respected debts in general, respecting debts and obligations in general is definitely in keeping with Confucian thought, and it’s not as if English kings were all that respecting, even in those early times when the king was weakest:
Considering China’s long history of commercial expansion and innovation and great merchant fortunes, with financial instruments and arrangements not exceeded until the 1500s in Europe, if even then, it’s hard to think that China really suffered much from arbitrary and unjust laws.
Even including the Confucian countries like China & South Korea & Japan? Keep in mind that before the Lost Decade, Japan had a higher per capita than France (by almost $1000). And then there are other non-English-controlled countries like Argentina:
The classic work on how property rights leads to wealth is still Adam Smith’s The Wealth of Nations, written at the start of the industrial revolution and in the middle of an agricultural revolution. England went from over 80% agricultural workers in 1870 to only 30% in 1800, freeing up labor for the industrial revolution; this occurred largely through capital investments in land improvements, for example draining, marl, and lime (http://www.bahs.org.uk/26n1a1.pdf). Smith captures well the legal changes going on, and that he saw as encouraging capital investment, such as the decline of the guilds, the replacement of primogeniture and the complex system of tenancies in land with alienable fee simple ownership, and the resultant enclosure movement, in which commons were replaced by single proprietor control of land.
Roughly speaking, Japan and the rest of East Asia converted to Roman law (the law of Western Europe outside of England) between the mid 19th (Japan) and mid 20th centuries. The process Smith describes was also a partial Romanization of English law into what we now know as the modern common law. So all countries to successfully industrialize have done so under variations of the Roman or English common law, and the English common law itself borrowed quite a bit from the Roman substantive law. (Contrast to Roman procedural law, which is awful, but that’s another story).
The interaction of the decline of political property rights with the industrial revolution is complicated. On the one hand, political corporations such as the East India Company and the West Indies and American colonies were very important to the British economy at that time. Overseas trade provided timber, cotton, and many other industrial inputs. On the other hand, the decline of political property rights in land led to the alienable ownership and the decline of the guilds that Smith and the new capitalists championed.
I particularly commend Book 3 Ch. 3 and Book 4 Ch. 7 of Wealth of Nations which cover much of this, albeit from Smith’s Romanist view. Sadly, most people never get past the famous Book 1.
East Asian institutions are hard to compare, first because their population may have an IQ advantage that makes up for institutional handicaps, and second because we don’t really know what they were: at least here in the West our knowledge of their old legal systems is extremely poor, and they underwent radical Westernization in the late 19th and 20th centuries. Clark’s genetic theory can’t explain why Britain declined so rapidly after about 1870 from being the leader in industrialization and a globe-straddling empire to being just another of dozens of medium-sized industrialized countries today. Political and legal developments, in particular the Reform movement, can, but that is a topic for another day.
Apart from a few very useful graphs Clark’s work is rather poor and this theories are silly. He needs to learn far more about both evolution and law to form useful theories in those areas. See http://unenumerated.blogspot.com/2007/09/institutional-changes-precedent-to.html and http://unenumerated.blogspot.com/2007/08/why-industrial-revolution.html.
Those are interesting links & comments, thanks!
gwern, do you have reference(s) for Chinese “financial instruments and arrangements not exceeded until the 1500s in Europe”? Thanks in advance.
Not up to your scholarly level, I don’t think. I’m largely going on the reading/research I did using De Roover and others to write http://en.wikipedia.org/wiki/Medici_Bank , where I was struck by the wretched subterfuges that merchants had to resort to and the general lack of sophistication, which struck me as quite different from Chinese systems with genuine fiat currency, undisguised interest, and general sophistication (there may’ve been Chinese insurance in there too, but I’ve forgotten any details of that).
Well, I’ve read a paper that supports a different perspective: usury laws were historically circumvented in the West and Middle East through clever use of (what we now call) the Put-Call Parity Theorem: any bonds that were issued were converted into a combination of puts, calls, and possibly rental contracts. This retains the substance of an interest-bearing loan, but without any explicit “interest payment” While the law might have been sophisticated, the resulting use of derivatives contracts was not.
The paper discusses the origin of mortgages in medieval England and the Middle East. It’s been a while since I read it, so I can’t summarize it, but I was shocked by their rather early trading of derivatives and options.
If it’s any good, interest (or ursary) was only legalised in England in 1571, up to a value of 10%.
Citation: Praise and Paradox; Merchants and craftsmen in Elizabethan popular literature, Laura Caroline Stevenson.