I have discussed here a few times (here, here and here, for example; last one by Cesaratto) the role of institutions in the process of economic development. Within the mainstream the dominant view is that property rights are the essential institution for promoting growth. I only now came across the excellent paper by Julian Hoppit.* He says:
* Julian Hoppit in "Compulsion, Compensation and Property Rights in Britain, 1688-1833," Past and Present, No. 210, Feb. 2011 (here; subscription required).
"Such views of the interrelated importance of property and the rule of law have led to major interpretations of the interplay of Britain’s economic, social and political histories, including that secure property rights were a vital foundation for the first industrial revolution. Yet property was often heavily taxed, frequently expropriated and, exceptionally, eradicated through redefinition. Such vulnerabilities did not diminish after the Glorious Revolution, they increased—mainly because parliament now met annually, had greater sovereign power than earlier monarchs and legislated prolifically regarding property. After 1688, Britain’s economic precocity rested less on the enhanced ‘security’ of property in any general sense of the word, much more on respect for parliament’s authority and its willingness to allow property to be alienated, most usually by particular interests claiming to act for the public or wider good. At times this required the reversal of commitments made only a generation earlier, raising doubts about central government’s credibility. Taken together, these uncertainties over property rights were sufficient for some to question whether property had a sound theoretical basis at all.Hoppit looks at the extensive expropriations in financial markets, after the South Sea Bubble, in heritable jurisdictions (offices granted by the Crown), and in the property of slaves. Very little is left of the new institutional argument.
...
The scale of that expropriation was such, and the consequences so profound, as to undermine an important thesis that property rights became more secure after the Glorious Revolution, developed in a notable essay by Douglass North and Barry Weingast and now conventional amongst some ‘new institutional economists’."
* Julian Hoppit in "Compulsion, Compensation and Property Rights in Britain, 1688-1833," Past and Present, No. 210, Feb. 2011 (here; subscription required).
Aside from a lot of U.S. legal history that suggests a critical view of the "property rights-growth) thesis (see Horwitz, /Transformation of American Law/), more recent work by Yale economic historian Naomi Lamoreaux comes to similar conclusions: see e.g. Naomi R. Lamoreaux, “Property Rights and Economic Development: Some Lessons from U.S. History,” Journal of Policy History, 18:1 (2006).
ReplyDeleteI did a short summary of her research on my blog here: http://imagininghistory.blogspot.com/2011/07/property-rights-and-capitalist-growth.html
THanks for the link Daniel!
DeleteIn addition the the work by Lamoreaux (who also has a 2011 paper here: http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=8287695), Gerald Friedman has offered something of a critical perspective on the property rights thesis here: http://works.bepress.com/gerald_friedman/1/.
ReplyDeleteThe key takeaway is that if you examine property rights as they were actually practiced in the court system (rather than simply examining the number of patents issued) you find that the early US continually redefined property rights based on the needs of development and to favor certain interests. The case of the Charles River Bridge is a classic example.Recall also early economic defenses of emminent domain. The unequivocal protection of property rights cannot then be relied on to explain long run economic growth in the US case.
From the Hoppit piece above, it seems the US and Britain have in common the adoption of "flexible" rather that strictly protected, property rights. Property rights were redefined or eradicated by the state in order to encourage development. This evidence suggests that if there is any consistent relationship between property rights and growth (though I suspect there is not) it is that more flexible property rights are associated with better growth. This is of course exactly opposed to the North (and more recently Acemoglu) thesis.
ReplyDeleteExactly. Hoppit says (p. 127): "what was crucial was not the security of property
Delete(save in the sense of the importance of a commitment to contract,due process and the rule of law) but the existence of effective
avenues to allow it to be alienated, to be used by those who would employ it more efficiently. Such means were important
in allowing new opportunities to be seized, for roads, canals and railways to be built along the most economic routes, for landlords
to create more productive farms, and so on."
I would say more explicitly that the alienation of property rights was effective to the extent that it allowed to expand the market (demand).
So, common law, court-centric legal traditions are important for their flexibility and not for their stability? That's some new wine in old bottles.
DeleteMore fundamentally, North and Weingast (1989) don't just emphasize property rights, they emphasizie the importantance of the impotence of the centralized state. They see states as predators. For them, only a weak state can credibly commit to property rights -- a weak state is equivalent to secure property rights. Unfortunately for such an arguement, if anything, the British state grew in both size, scope, and power (both at home and abroad) after 1688. The liberals (in the 19th century sense) actually have they history and theory quite wrong -- it takes a strong state to protect the conditions for capital accumulation by suppressing the workers, protecting surplus extraction, opening new domestic markets (e.g. suppressing the guilds), and opening new foreign markets (e.g. Opium wars). England (Britain) gets a strong state after 1688. The 18th/19th century British state is predatory, but it doesn't prey on capital; instead, it preys on labor and foreigners.
ReplyDelete