Law, Informal Rules and Economic Performance

Law, Informal Rules and Economic Performance

The Case for Common Law

Svetozar Pejovich and Enrico Colombatto

Capitalism has outperformed all other systems and maintained a positive growth rate since it began. Svetozar Pejovich makes the case within this book that a major reason for the success of capitalism lies in the efficiency-friendly incentives of its basic institutions, which continuously adjust the rules of the game to the requirements of economic progress. The analysis throughout is consistent and is supported by evidence. Key components of the proposed theory are the rule of law, the market for institutions, the interaction thesis, the carriers of change, and the process of changing formal and informal institutions.


Leonard P. Liggio

Subjects: economics and finance, institutional economics, law and economics, public choice theory, law - academic, law and economics, politics and public policy, public choice


Leonard P. Liggio* Svetozar Pejovich has been a leading scholar of the economics of property rights. His writings and his conference participations in Europe and America have contributed to the profession’s understanding of important concepts in law and economics. In Law, Informal Rules and Economic Performance, Pejovich presents us with an overview of the issues on which he has worked for many years. In his famous comment, Sir Henry Maine stated that modern civilization represented the movement from status to contract. Behind that crucial movement was the emergence of the rule of law. It is the role of the rule of law in the transition to modern civilization which is described by Pejovich. The rule of law makes possible the enforcement of property rights; and property rights make possible man’s progressive adoption of new technology to new challenges. Pejovich examines the different consequences of the two major Western legal systems. The Anglo-American legal tradition of common law emphasizes the continuity of legal principles applied to different or new circumstances. The process of seeking answers for the future from the decisions of the past gives the common law the space for growth. The Continental legal system founded on the civil code seeks a different route to meet challenges. Professor Enrico Colombatto of the University of Turin in Italy has contributed sections on the Italian and Swiss constitutions as well as discussing the book with the author. Pejovich indicated the role of the evolution of the legal process in the example of...