Chen, D. and Deakin, S. (2015) On Heaven's Lathe: State, Rule of Law, and Economic Development. Law and Development Review, 1 (8). pp. 123-145. ISSN 1943-3867
Abstract
We propose a theoretical framework for understanding the evolution of the rule of law state, which is conceived as the equilibrium of a societal game in which actors accept the legitimacy of publicly enunciated legal rules. A meta-norm of respect for the sovereign legal power of the state is not self-forming on the basis of private conduct, but requires the coevolution of impersonal market exchange with effective state capacity to constitute and regulate markets. A functioning legal system must acquire the means not just to control private power but to constrain other organs of government. The emergence of such a ‘self-limiting state’ is an historical process which, while complementary to a market order, is also contingent and path-dependent, and is not preordained. Illustrating our argument with empirical evidence drawn from the contemporary experience of middle-income countries, with a focus on China, we argue that alternatives to the rule of law state, including interpersonal trust, closed networks and authoritarian political control, can only achieve limited scale and scope effects, and are prone to high deadweight costs arising from corruption and the capture of the public sphere by private interests. We also discuss the potential of transplants of legal rules and institutions to catalyse the transition to impersonal trade based on the rule of law, and present evidence, from time-series econometric analysis, that the diffusion of shareholder protection laws has the potential to support financial development in emerging markets. Evolution towards the rule of law state is, we conclude, one possible developmental path for middle-income countries.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2015 Deakin et al. published by De Gruyter. This article is distributed under the terms of the Creative Commons Attribution 3.0 Public License (CC BY 3.0) |
Keywords: | Rule of law; economic development; emerging markets; China; guanxi |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > School of Law (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 22 Apr 2016 09:36 |
Last Modified: | 22 Apr 2016 09:36 |
Published Version: | http://dx.doi.org/10.1515/ldr-2014-0031 |
Status: | Published |
Publisher: | De Gruyter |
Refereed: | Yes |
Identification Number: | 10.1515/ldr-2014-0031 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:98776 |