The rule of law and the emergence of market exchange: A new institutional economic perspective

Justus Haucap

No 276, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: Markets, where buyers and sellers can exchange goods and services, are key to the division of labor, specialisation, the realisation of economies of scale and scope and, therefore, economic prosperity, growth and development. The better markets work the easier it is to reap the benefits of specialisation and the gains from trade and voluntary exchange. For the emergence of market exchange, in turn, stable and secure property rights are key. These rights should be defined as clearly as possible and be as stable and secure as possible, in order to foster investment and to incentivize the careful and diligent treatment of assets. Hence, the rule of law and secure property rights go hand in hand with the emergence of markets, gains from trade and economic growth and prosperity.

Date: 2017
New Economics Papers: this item is included in nep-hpe
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