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. This book will be of great interest to academics and students of law and economics, new institutional economics, comparative systems and public choice throughout the World and especially in East Asia and South America where institutional issues are being debated.
Foreword by Leonard P. Liggio
Pt. I Basic Economic Concepts
1 The game and the rules of the game 3
2 Transaction costs 13
Pt. II Transformation of the Medieval Community into Modern Society: The Rise of Classical Liberalism, the Rule of Law and Capitalism
3 From the Middle Ages to capitalism 25
4 Capitalism and the rule of law 37
App Afraid to be free: dependency as desideraturm by James M. Buchanan 46
5 The law of contract and the judiciary 59
6 The economic functions of the constitution 67
7 Private property rights 86
8 Capitalism, economic freedom and performance 96
9 The rule of law and capitalism: an overview 105
Pt. III Toward a Theory of Institutional Change
10 The method of analysis 115
11 The interaction thesis 121
12 The carriers of change: the role of entrepreneurs 129
13 Formal institutions 141
14 Informal institutions or cultural traditions: the role of pathfinders 155
15 Efficiency-friendly institutional change within the structure of tradition
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