Wealth and the Rule of Law

This article discusses findings from a recent study that show a positive correlation between the rule of law and the economy in terms of GDP per person. This should come as no surprise, because investors have more confidence in placing their capital in those countries that are politically stable. Citizens have a respect for the law when it is knowable and predictable. As laws increase in number and complexity, the populace loses this respect, thereby causing peace and order to decline. However, the study mentioned that is was difficult for economists to establish a link between rule of law and growth. Countries like China seem to go against the norm in this area. Why is this case?

1 comment:

Dr. Tufte said...

China goes against the grain because the effect here is secondary is size.

The primary one is that it easier to catch up than to lead. So China can sustain high growth rates as long as it is behind.

Its ability to match U.S. growth rates once it catches up will depend on the rule of law.