Irigoin, A and Grafe, R (2012): Bounded Leviathan: or why North & Weingast are only right on the right half. Published in: LSE Economic History Department Working Papers No. 164/12 : pp. 1-33.
Download (295kB) | Preview
‘Constitutions and Commitments” has inspired the economic literature on the importance of “Legal origins” (LaPorta et al., 1998, 2008), which vindicates the notion that post-Glorious Revolution English institutions were particularly conducive to economic growth. More recently economists have acknowledged that growth in fact depends on “state capacity”. This encompasses not only investor protection (legal capacity) but also the ability of the state to finance itself, “fiscal capacity”.(Besley and Persson, 2009, 2010) show that the protection of private property rights and that of public property rights to taxation are linked and most likely co-evolutionary. However, the precise relation between the two is anything but clear. This paper argues that North and Weingast’s model’s one-sided focus on state coercion that threatened subjects’ property rights has obscured the relation between coercion used in revenue collection and total revenue role of fiscal capacity. We suggest a very simple model to show that this relationship between state fiscal capacity and legal capacity is not linear, especially in the phase of nation state building. The case of Spain provides empirical evidence for the existence of states were an increase in coercion would have improved fiscal capacity, but high levels of legal capacity paradoxically prevented the ruler from adopting this path. We use financial market developments to show the serious welfare implications that resulted from such a lack of coordination and integration.
|Item Type:||MPRA Paper|
|Original Title:||Bounded Leviathan: or why North & Weingast are only right on the right half|
|Keywords:||'Constitution & Commitment'; 'legal origins'; 'state capacity'; 'fiscal capacity'|
|Subjects:||E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy
K - Law and Economics > K0 - General
N - Economic History > N0 - General
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy ; Legal Institutions ; Property Rights ; Natural Resources ; Energy ; Environment ; Regional Studies
|Depositing User:||Alejandra Irigoin|
|Date Deposited:||28 Jun 2012 14:47|
|Last Modified:||26 Sep 2016 07:55|
Andrien, K. 1981. ‘The sale of juros and the politics of reform in the viceroyalty of Peru, 1608-1695’. Journal of Latin American Studies, 13, 1-19.
Ashworth, W. J. 2003. Customs and excise: trade, production, and consumption in England, 1640-1845, Oxford ; New York, Oxford University Press.
Besley, T. & Persson, T. 2009. ‘The Origins of State Capacity: Property Rights, Taxation, and Politics’. The American Economic Review, 99, 1218-1244.
Besley, T. & Persson, T. 2010. ‘State Capacity, Conflict, and Development’. Econometrica, 78, 1-34.
Braddick, M. J. 1996. The nerves of the state. Taxation and the financing of the English state, 1558-1714, Manchester and New York, Manchester University Press.
Brennan, G. & Buchanan, J. M. 1980. The power to tax: analytical foundations of a fiscal constitution, Cambridge, Mass., Cambridge University Press.
Brennan, G. & Buchanan, J. M. 1985. The reason of rules: constitutional political economy, Cambridge ; New York, Cambridge University Press.
Brewer, J. 1989. The sinews of power. War, money and the English state, 1688-1783, London, Unwin Hyman.
Burns, K. 1999. Colonial habits: convents and the spiritual economy of Cuzco, Peru, Durham [N.C.], Duke University Press.
Burns, K. 2010. Into the archive: writing and power in colonial Peru, Durham [N.C.], Duke University Press.
Capella Martínez, M. & Matilla Tascon, A. 1957. Los Cinco Gremios Mayores de Madrid. Estudio crítico-histórico, Madrid, Cámara Oficial de Comercio e Industria.
Chowning, M. 1989. ‘The Consolidación de Vales Reales in the Bishopric of Michoacan’. Hispanic American Historical Review, 69, 451-78.
Clark, G. 1996. ‘The Political Foundations of Modern Economic Growth: England, 1540-1800’. Journal of Interdisciplinary History, 26, 563-588.
Drelichman, M. & Voth, H. J. 2011a. Funding empire: Risk, diversification and the underwriting of early modern sovereign loans. Working Paper.
Drelichman, M. & Voth, H. J. 2011b. Risk sharing with the monarch: Contingent dept and excusable defaults in the age of Philip II, 1556-1598. Working Paper.
Drelichman, M. & Voth, H. J. 2011c. ‚Serial defaults, serial profits: Returns to sovereign lending in Habsburg Spain, 1566-1600’. Explorations in Economic History, 48, 1-19.
Ehrenberg, R. 1896. Das Zeitalter der Fugger: Geldkapital und Creditverkehr im 16. Jahrhundert, Jena, G. Fischer.
Epstein, S. R. 2000. Freedom and growth: the rise of states and markets in Europe, 1300-1750, London, Routledge.
Fritschy, W. 2009. The Efficiency of Taxation in Holland. In: GELDERBLOM, O. (ed.) The Political Economy of the Dutch Republic. Farnham: Ashgate.
García de Paso, J. I. 2000. ‘La estabilización monetaria en Castilla bajo Carlos II’. Revista de Historia Económica, XVIII, 49-77.
Gelderblom, O. & Jonker, J. 2008. Collective Spirit or Aggregate Wealth? Understanding the Structure and Growth of Holland's Public Debt, 1514-1713. paper presented at Rutgers Workshop in Money, History and Finance.
Gibbs, D. L. 1989. ‘The economic activities of nuns, friars, and their conventos in mid-colonial Cuzco’. The Americas, 45, 343-62.
Grafe, R. 2012. Distant Tyranny. Markets, Power and Backwardness in Spain 1650-1800, Princeton, Princeton University Press.
Grafe, R. & Irigoin, A. 2006. ‘The Spanish Empire and its Legacy: Fiscal Re-distribution and Political Conflict in Colonial and Post-Colonial Spanish America’. Journal of Global History, 1, 241-267.
Grafe, R. & Irigoin, A. 2012. ‘A Stakeholder Empire: The political economy of Spanish imperial rule in America’. Economic History Review, 65.
Greenow, L. L. 1983. Credit and socioeconomic change in colonial Mexico: loans and mortgages in Guadalajara, 1720-1820, Boulder, Colo., Westview Press.
Grieco, V. 2005. Politics and public credit: the limits of absolutism in late colonial Buenos Aires. PhD, Emory.
Hamilton, E. J. 1943. ‘Monetary Disorder and Economic Decadence in Spain, 1651-1700’. The Journal of Political Economy, 51, 477-493.
Hamilton, E. J. 1944. ‘War and inflation in Spain’. Quarterly Journal of Economics, 59, 36-77.
Hamnett, B. R. 1969. ‘The appropriation of Mexican Church wealth by the Spanish Bourbon gonverment. The "consolidación de vales reales" 1805-1809’. Journal of Latin American Studies, 1, 85-113.
Irigoin, A. 2009. ‘The End of a Silver Era: The Consequences of the Breakdown of the Spanish Peso Standard in China and the United States, 1780s-1850s’. Journal of World History, 20, 207-243.
Irigoin, A. & Grafe, R. 2008. ‘Bargaining for Absolutism. A Spanish Path to Empire and Nation Building’. Hispanic American Historical Review, 88, 173-210.
Kuran, T. 2010. The long divergence: how Islamic law held back the Middle East, Princeton, Princeton University Press.
Kwass, M.. (forthcoming) “Court Capitalism, Illicit Markets and Political Legitimacy in Eighteenth-Century France: The Salt and Tobacco Monopolies” in D.M.Coffman (ed) Questioning Credible Commitment
La Manna, M. & Stomp, G. 1994. ‘Leviathan; revenue maximiser or glory seeker?’ Constitutional Political Economy, 5, 159-172.
La Porta, R., Lopez-de-Silanes, F. & Shleifer, A. 2008. ‘The Economic Consequences of Legal Origin’ Journal of Economic Literature, 46, 285-332.
Lane, F. C. 1958. Economic Consequences of Organized Violence. Journal of Economic History, 18, 401-417.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. & Vishny, R.W. 1998. ‘Law and Finance’. Journal of Political Economy, 106, 1113-1155.
Lavrín, A. 1966. ‘The Role of Nunneries in the Economy of New Spain in the Eighteenth Century’. Hispanic American Historical Review, 46, 371-93.
Levi, M. 1988. Of Rule and Revenue, Berkeley, Los Angeles and London, University of California Press.
Marichal, C. 2007. Bankruptcy of Empire. Mexican Silver and the Wars Between Spain, Britain and France, 1760-1810, Cambridge, Cambridge University Press.
Martines, L. 1988. ‘Political and Social Strains in "Quatrrocento" Florence’. The Journal of Modern History, 60, 300-311.
Nogues-Marco, P. 2010. Bullionism, specie-point mechanism and bullion flows in the early 18th century Europe. unpubl. PhD, Sciences Po.
North, D. C. & Weingast, B. R. 1989. ‘Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England’. Journal of Economic History, XLIX, 803-832.
O'Brien, P. 2010. ‘The nature and historical evolution of an exceptional fiscal state and its possible significance for the precocious commercialization and industrialization of the British economy from Cromwell to Nelson’. The Economic History Review, 64, 408-446.
Olson, M. 2000. Power and prosperity: outgrowing communist and capitalist dictatorships, New York, Basic Books.
Phillips, C. R. & Phillips, W. D., JR. 1997. Spain's Golden Fleece. Wool Production and the Wool Trade from the Middle Ages to the Nineteenth Century, Baltimore and London, The Johns Hopkins University Press.
Quriroz, A. W. 1993. Deudas olvidadas : instrumentos de crédito en la economía colonial peruana 1750-1820, Lima, Pontificia Universidad Católica del Perú Fondo Editorial.
Quiroz, A. W. 1994. ‘Reassessing the Role of Credit in Late Colonial Peru: Censos, Escrituras, and Imposiciones’. Hispanic American Historical Review, 74, 193-230.
Riley, J. C. 1980. International government finance and the Amsterdam capital market, 1740-1815, Cambridge, Cambridge University Press.
Rodríguez-Salgado, M. J. 1988. The Changing Face of Empire, Cambridge, Cambridge University Press.
Sussman, N. & Yafeh, Y. 2006. ‘Institutional Reform, Financial Development and Sovereign Debt: Britain 1690-1790’. The Journal of Economic History, 66, 906-935.
Tedde de Lorca, P. 1984. ‘El Banco de San Carlos y la real hacienda (1794-1828)’. In: Artola, M. & Bilbao Bilbao, L. M. (eds.) Estudios de Hacienda: De Ensenada a Mon. Madrid: Instituto de Estudios Fiscales.
Temin, P. & Voth, H.-J. 2005. ‘Credit rationing and crowding out during the industrial revolution: evidence from Hoare's Bank, 1702-1862’. Explorations in Economic History, 42, 325-348.
Thompson, I. A. A. 1994. ‘Castile: Polity, Fiscality, and Fiscal Crisis’. In: Hoffman, P. T. & Norberg, K. (eds.) Fiscal Crises, Liberty, and Representative Government, 1450-1789. Stanford: Stanford University Press.
Tilly, C. 1975. The formation of national states in Western Europe, Princeton, N.J., Princeton University Press.
Tilly, C. 1990. Coercion, Capital and European States, AD 990-1990, Cambridge, Blackwell.
von Wobeser, G. 2010. El crédito eclesiástico en la Nueva España. Siglo XVIII, Mexico, Fondo de cultura económica.
Available Versions of this Item
- Bounded Leviathan: or why North & Weingast are only right on the right half. (deposited 28 Jun 2012 14:47) [Currently Displayed]