Trade, Self-Governance,and the Provision of Law and Order, with an Application To Medieval English Chartered Towns
Charles Angelucci and
No 13-443, TSE Working Papers from Toulouse School of Economics (TSE)
We build a model to investigate the interaction between trade, the supply of law and order, and the nature of governing political institutions. To supply law and order necessary for a representative merchant to create wealth, a ruler (i) appoints officials capable of coercion and (ii) introduces a system of taxation. When potential gains from trade are important, the demand for law and order is high but appointing numerous officials capable of coercion may pave the way to arbitrary and distortive expropriation. Delegating the task of appointing offi- cials to the better-informed merchant lowers the cost of sustaining good market institutions, but exacerbates the latter's temptation to escape taxation. When gains from trade are instead low delegation never occurs. Our theory provides a rationale for the case of post-Norman Conquest England (1066-1307) where, in parallel with the rise of trade, kings increasingly give in to the citizens' desire of self-governance by granting Charters of Liberties.
Keywords: Institutions; Law Enforcement; Trade; Delegation; Taxation; Bureaucracy (search for similar items in EconPapers)
JEL-codes: D02 D23 D73 P14 P16 (search for similar items in EconPapers)
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