Some questions about Legal Origins Theory

I still feel weird about the Legal Origins Theory though I had took the course of State, Law and Economy a year ago. It is just too powerful and pervasive to be true for me. As a result, to find out my real questions, just a few months ago, I tried to read carefully The Economic Consequences of Legal Origins again, which summarized those powerful empirical effects of legal origins on an economy.

First, I found the definition of legal origins a bit abstract. Broadly speaking, one could differentiate legal origins into two: common law and (French) civil law. However, the precise definition of legal origins refers to the style or strategies or ideas of social control, which may be actually difficult to decipher its substance in reality. Furthermore, in explaining the trend of increasing government regulation in Common law countries after 19th century, which was inconsistent with the authors’ original idea that common law countries should use litigation and court instead, they almost fell into the danger of tautology, saying that those increasing regulations were still in the style of common law as supporting the normal operation of market rather than substituting it (La Porta et al., 2008).

I also re-read Legal Origins, which tried to lay down the theoretical foundation of legal origins theory. However, surprisingly, I found the article maybe coming against their intention and accidentally destroying itself. In empirical research, the proposed characteristics of exogeneity and persistence of legal origins are used in defending the significant effect in the regression of legal origins and many other economic variables rather than merely reverse causality and omitted variables. The exogeneity comes from the history of forced transplantation by colonization and war. The persistence comes from somehow path dependence by the incorporation of beliefs and ideologies into legal and political infrastructure and also human capital of regulators and judges from education (La Porta et al., 2008). However, in explaining the initial divergence and continuing persistence of legal origins in mother countries, i.e. Britain and France, the authors of Legal Origins chose to use the extent of political stability and power distribution between local and central government since 11th and 12th century as the main explanatory variable (Glaeser & Shleifer, 2002).

According to Glaeser & Shleifer (2002), the central requirement of legal system is to protect law enforcers from corruption and violence by litigants. The higher the vulnerability of subversion by the powerful, the greater the need for the state to protect and control its law enforcer. Since England was relatively peaceful with the king clearly having greater power during that period, decentralized dispute resolution in the form of independent local knights (juries) became possible and more efficient. However, since in France, the feudal lords had much greater power to subvert local justice with the king even unable to have full military control over the whole France, centralized royal judges supported by sovereign came up with more preferred solution to enforce law and maintain order. The “state capture" by codification and “royal political bias" of judges then became necessary evil. Since these differences also persisted for centuries, legal systems persisted as well.

Then there comes up a question: just like what I conjecture in the former paragraph, it seems that the true variable behind legal origins lies in the extent of domestic peacefulness, or more precisely, the distribution of violence and political power between center and local within one state. The seemed different practices between common law and civil law such as “the reliance on written records versus oral argument,importance of trials, role of appeal, combining versus separating prosecution from judging, and the importance of precedent (Glaeser & Shleifer, 2002, p.1196)" just serve as intermediate variables or symbols of political power distribution.  Following this logic, legal origins itself becomes no longer exogenous but endogenous in the process of power struggle and displays persistence only contingent on stable equilibrium of political power distribution within one state like the long period of greater king in England or stronger local magnates in France. And we have no special reason to believe that legal origins display exogeneity only in colonies but not in their mother countries.

The authors’ further arguments just imply this idea. According to Glaeser and Shleifer (2002), as juries become more and more able to resist political pressure and corruption, bright line rules become more and more accurate to the line of public and societies become more and more democratic, two law systems will converge to the same efficient result. In other words, it simply confirms that as the political power of citizens become more stronger, the law will more reflect the preference of community rather than powerful elites.

And that may be the reason why Acemoglu (2005) found no effect of legal origins on property right institutions but only on contract institutions. Since legal origins itself only serve as the proxy of political power distribution between the powerful elites and citizens, when the (real) instrumental variables of property rights institutions such as the log mortality rate of European settlers or the log of the indigenous population density in 1500 are put into the regression, we then found no first order effect of legal origins on long-run economic growth, investment, and financial development. The effect of legal origins only displays in the form of contracting, which just surprisingly corresponded to the initial definition of legal origins: the style or ideas or strategies of social control related to identity and cultural tradition.

It further implies that under the good or stable arrangement of political power, the form of contract itself matters not so much, which reminds me of what Steven Cheung defended the efficiency of share tenancy in his well-known The theory of Share Tenancy, “The implied resource allocation under private property rights is the same whether the landowner cultivates the land himself, hires farm hands to do the tilling, leases his holding on a fixed rent basis, or shares the actual yield with his tenant. … different contractual arrangements do not imply different efficiencies of resource use as long as these arrangements are themselves aspects of private property rights (Cheung, 1969, p.4)."

In addition, in these days, I accidentally found more evidence supporting my conjectures in Robert Brenner’s The Agrarian Roots of European Capitalism (1982) when I am doing the research about Sweden welfare state. Since I cannot come up with a better way other than citing the original paragraph, I would just cite it anyway though it is a bit long.

“As has often been recognized, it thus makes little sense systematically to counterpose the English monarch as chief lord with the barons who surrounded him, supported in turn by their own followers. An unusually strong monarchy reflected an unusually strong aristocracy, hierarchically organized in the most highly developed feudal state in Europe. Monarchical government was indeed a manifestation of the lords’ more or less conscious recognition of the commonality of their interests, and of the need to regulate their mutual interrelations in order successfully to exploit the peasantry, as well as to profit handsomely, as they did, from exerting their military might against other aristocratic groupings on the Continent. The growth of a powerful monarchical state in England, therefore, expressed no “merely political" evolution, but the construction of social-class relations which made possible the most effective “accumulation" in the economic realm.

… the restrengthening of the monarchy during the latter part of the twelfth century seems to have been reflected in the reconstruction of lordly power over the peasants from about the same time. The growth of monarchical authority found its highest expression in the development of royal justice and the common law. Especially with the “legislation" of Henry II, the feudal aristocracy registered its common interest in allowing the monarchical courts to adjudicate disputes among them over privileges and property (although it goes without saying that the royal administration never escaped aristocratic control). In this way the ruling class secured the private rights of its individual members. …

… the key long-term basis for the development and consolidation of effective centralized monarchy in France, especially from the later thirteenth century, was the relative superiority of its centralized system of surplus extraction (especially state taxation)
over the decentralized, competitive lordship of the castellans and other great magnates. … For the Capetian house began as one lordship among many, one feudal “political accumulator" among many. It emerged and established itself as a greater lordship over and against, in competition with, the more localized, more individualized lordships. … The competitive process through which the monarchy evolved was also manifested in the development of royal justice as a mechanism to fill the royal coffers at the expense of the seigneurial courts, and above all in the rise of (arbitrary) royal taxation which threatened the collection of lordly dues of all sorts. It was, finally, tellingly expressed in the French crown’s propensity to recognize peasant appeals against arbitrary levies by local seigneurs at a time (the later thirteenth century) when, in stark contrast, the English monarch was recognizing the lords’ rights over their peasants’ persons and property by refusing them access to the royal courts. This divergent evolution of peasant legal status – towards property sanctioned by monarchy in France, towards serfdom backed by the crown in England – appears to provide a significant index of the divergent patterns of class formation and class conflict and of the divergent evolutions of the systems of property in the two regions at this period (Brenner, 1982, p.39-44)."

In addition to indicating legal origins as the proxy of political power distribution, it further pointed out the total opposite reason of divergence of legal practices across the English Channel rather than what Glaeser and Shleifer (2002) reasoned (and I think it may be the neglect of peasants and taking local notables’ preferences as the community’s including peasants that caused this large divergence). It is not the greater power of local magnates in France that caused the use of civil law but oppositely the weaker and inefficient extraction mechanism of local magnates compared to royal centralized state (also the competition between the lords and the king) and peasant resistance to the feudal lords. The use of common law does symbolize the English king’s greater power than the French king, but it is based on the cohesion and symbiosis between aristocracy and king rather than the king prevailed “over" the nobles. Also it may be the process of state building and centralization that made legal origins persistent rather than itself just showing persistence.

References:

Acemoglu, D., & Johnson, S. (2005). Unbundling institutions. Journal of political Economy, 113(5), 949-995.

Brenner, R. (1982). The agrarian roots of European capitalism. Past & Present, (97), 16-113.

Cheung, S. N. (1969). The theory of share tenancy. Arcadia Press Ltd..

Glaeser, E. L., & Shleifer, A. (2002). Legal origins. The Quarterly Journal of Economics, 117(4), 1193-1229.

La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2008). The economic consequences of legal origins. Journal of economic literature, 46(2), 285-332.

 

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