Saturday, July 12, 2008

Ideas matter

In terms of stimulating ideas per page, few papers that I know come close to "The Economic Consequences of Legal Origins" by Rafael La Porta, Florencio Lopez-de-Salines and Andrei Schleifer, in the June, 2008, Journal of Economic Literature.

As the title suggests, legal origins matter a lot. Common law traditions beat civil law traditions when it comes to explaining institutions that beget prosperity. Teasing a result of such profundity from a complex historical record is a real achievement. What Hayek wrote about in 1960 (and Smith in 1776) can now be tested and corroborated with modern data and methods.

Economics and history enrich each other. And the the law-and-economics approach along with new data run through modern statistical rules of evidence make a compelling story.