Law and Long-Term Economic Change: A Eurasian Perspective ed. by Debin Ma and Jan Luiten Van Zanden (review)

What are the relations between the law and long-term economic changes? In this anthology, fifteen scholars attempt to answer this ambitious, yet fundamental, question about the history of economic development, to which both Karl Marx and Max Weber also sought an answer. More specifically, these scholars are interested in inquiries such as:

1. 1. How did the so-called rules of the game and legal institutions emerge and evolve, and why were these institutions structured as they were?

2. 2. What were the long-term impacts of these legal institutions on economic development?

Although their approaches differ greatly in terms of regional and institutional focus, the authors seem to agree on the following generalizations. First, legal rules had long-lasting consequences on long-term economic trajectories for different civilizations. Second, sociopolitical power structures determine the nature of legal systems. The state or social political power structures acted as filters, letting through ideas compatible with the interests of those who controlled them and suppressing the others (pp. 4–5). In other words, law, or legal institutions, reflected the interests of the ruling elite.

Culture matters in the formation of a legal institution. These authors employ a three-layer analytical model—cultural traditions or values, social and political structures, and institutional rules—to delineate the formation process of a legal institution. The first two tiers filtered through the ideas that would be acceptable to those who controlled the institutions. Then the filtered ideas were formalized and institutionalized to become legal regimes. If cultural traditions were more open and adaptive, they argue, legal institutions would gain the vitality to continue. On the other hand, if social and political structures, acting as filters, serve only the narrow interests of the status quo, legal institutions will eventually petrify and become obsolete.

The ripple effects of the Great Divergence debate permeated the study of law and long-term economic change. Two articles in this anthology attempt dialogues with the Great Divergence theory. Their findings, though, are inconclusive. Examining Chinese legal tradition, Ma argues that the divergent legal traditions of Europe and China should bear greater explanatory power with regard to that long-term economic divergence. While Ma is more assertive in rejecting the Great Divergence theory, Kishimoto hesitates to do so outright. She rejects the theory on the ground that the thesis that the Chinese type of ownership may have had the potential to generate modern economic growth is counterfactual. Her evidence only affirms that, “the underpinning Chinese legal culture may not itself hold the key to the unique breakthrough of modern economic growth” (p. 86).

Although less explicit, the findings of the other authors challenge the Great Divergence theory from the perspective of the law and economy. Most articles exploring European legal institutions point out that it took a long time for a legal institution to take shape. The roots of the legal institutions that had favorable effects on modern economic activities often took centuries to evolve. The Great Divergence theory, from this point of view, did not begin in the early modern era; rather, it began to take shape in medieval Europe. For example, the bankruptcy law, which is essential for a capitalist industrial economy, emerged in the thirteenth and fourteenth centuries in northern Italy. Bankruptcy had been a common practice in European business circles, and the French formalized it by writing it into their commercial code of 1673 and 1807 (p. 200). The bankruptcy law then spread to the rest of the world to facilitate the growth of the modern economy. A similar line of arguments can also be found in the empirical studies on the evolution of the debt litigation institution in Holland (Dijkman), the establishment of commercial conflict settlement institutions in the Low Countries (Gelderblom), and the formation of the London Stock Exchange regulations (Neal). All of these trading rules and legal institutions, which have been crucial to the...