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Journal of Economic Literature: Vol. 47 No. 3 (September 2009)
JEL Volume. 47, Issue 3 | 
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JEL Indexes (Members Only)Finance and Politics: A Review Essay Based on Kenneth Dam's Analysis of Legal Traditions in The Law-Growth Nexus
Article Citation
Roe, Mark J., and
Jordan I. Siegel. 2009. "Finance and Politics: A Review Essay Based on Kenneth Dam's Analysis of Legal Traditions in The Law-Growth Nexus."
Journal of Economic Literature,
47(3): 781-800.
DOI: 10.1257/jel.47.3.781
DOI: 10.1257/jel.47.3.781
Abstract
Strong financial markets are widely thought to propel economic development, with
many in finance seeing legal tradition as fundamental to protecting investors sufficiently
for finance to flourish. Kenneth Dam finds that the legal tradition view inaccurately
portrays how legal systems work, how laws developed historically, and how
government power is allocated in the various legal traditions. Yet, after probing the
legal origins' literature for inaccuracies, Dam does not deeply develop an alternative
hypothesis to explain the world's differences in financial development. Nor does he
challenge the origins core data, which could be origins' trump card. Hence, his analysis
will not convince many economists, despite that his legal learning suggests conceptual
and factual difficulties for the legal origins explanations. Yet, a dense political
economy explanation is already out there and the origins-based data has unexplored
weaknesses consistent with Dam's contentions. Knowing if the origins view is truly
fundamental, flawed, or secondary is vital for financial development policy making
because policymakers who believe it will pick policies that imitate what they think
to be the core institutions of the preferred legal tradition. But if they have mistaken
views, as Dam indicates they might, as to what the legal traditions' institutions really
are and which types of laws are effective, or what is really most important to financial
development, they will make policy mistakes -- potentially serious ones.
Article Full-Text Access
Full-text Article
Authors
Roe, Mark J. (Harvard U)
Siegel, Jordan I. (Harvard U)
Siegel, Jordan I. (Harvard U)
JEL Classifications
E23: Macroeconomics: Production
H11: Structure, Scope, and Performance of Government
K10: Basic Areas of Law: General (Constitutional Law)
K40: Legal Procedure, the Legal System, and Illegal Behavior: General
N40: Economic History: Government, War, Law, and Regulation: General, International, or Comparative
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O40: Economic Growth and Aggregate Productivity: General
H11: Structure, Scope, and Performance of Government
K10: Basic Areas of Law: General (Constitutional Law)
K40: Legal Procedure, the Legal System, and Illegal Behavior: General
N40: Economic History: Government, War, Law, and Regulation: General, International, or Comparative
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O40: Economic Growth and Aggregate Productivity: General
