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Simone Meraglia, TSE and NYU Print
Tuesday, 25 March 2014, 14:00 - 15:15

Simone Meraglia, TSE and NYU

Trade, Self-Governance and the Provision of Law and Order, with an Application to Medieval English Chartered Towns

Abstract: We 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 ocials and (ii) introduces a system of taxation. However, appointing numerous ocials may pave the way to unobservable arbitrary and distortive expropriation. The ruler may escape the ensuing ineciency by delegating the task of appointing ocials to the better-informed merchant, at the cost of exacerbating his temptation to escape taxation. Delegation occurs when high potential gains from trade determine a high demand for law and order, and results in a lower cost of sustaining good market institutions. Our theory provides a rationale for the case of post-Norman Conquest England (1066-1307) where, in parallel with the rise of trade and the build-up of administrative power, kings increasingly give in to the citizens' desire of self-governance by granting Charters of Liberties.

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