Adam Smith argued that, as the monopoly provider of religious services, the medieval Church represented a formidable impediment to economic development. How did the Church maintain its monopoly; and how did that monopoly break down in the Reformation? Further, given that the secular lords had a substantial comparative advantage in violence relative to the Church, how did the Church maintain its power? In addressing these questions, Smith developed a rich and systematic approach to the incentives, institutions, and competition surrounding the medieval Church.

Margaret Levi and Barry Weingast focus on a particular type of case in which the subject is an outcome that results from strategic interaction, when one person’s decision depends on what another does. “A weakness of case studies per se is that there typically exist multiple ways to interpret a given case,” they begin. “How are we to know which interpretation makes most sense? What gives us confidence in the particular interpretation offered?” An analytic narrative first elucidates the principal players, their preferences, key decision points and possible choices, and the rules of the game. It then builds a model of the sequence of interaction including predicted outcomes and evaluates the model through comparative statics and the testable implications the mode generates. Most analytic narratives model situations as extensive form games. However, although game theory is useful, there is no hard rule that requires us to formalize. In this kind of case study, the findings do not generalize to other contexts, but instead point to the characteristics of situations to which a similar strategic logic applies.

What is the rule of law, and under what conditions does it become a self-reinforcing, stable order? Missing from the various literatures that have attempted an answer is a coherent attempt to create a satisfying account of the microfoundations of the behaviors that generate and sustain a distinctively legal order. Whether philosophical or applied, existing approaches to the rule of law have neglected the question of what, exactly, is distinct about law’s rule. We do not yet know enough about what sets legal ordering apart from other strategies of ordering, be they economic, political, or violent.1 This chapter responds to this lacuna. In so doing it gives an account of the kinds of things required for a positive theory of the rule of law.

INTRODUCTION

In the Athenian law-courts, wealthy, educated and well-born elites fought one another to prevail as leaders and advisors of the masses. Regulated by the masses’ ideals of a good society, elite competition pushed Athens towards stability, prosperity and cultural immortality. Or did it?

Classical scholarship has long analysed interactions in the lawcourts as a contest among elite litigants and mass jurors. The ‘mass and elite model’ (henceforth, M&E) owes its original elaboration to the work of Josiah Ober (1989). For Ober, Athenian political stability in the fourth century was the product of ideological negotiations between masses and elites carried out through the medium of rhetoric. Rhetorical discourse allowed the Athenians to manage the tensions arising from the existence of economic and social inequality in the context of a democratic system based on political equality. In the decision-making institutions of the polis – including, but not limited to, the law-courts – the masses regulated elite ambition by pitting elite advisors against each other and by bestowing honours on good advisors. In Ober's own words (1989: 333), ‘the ideological hegemony of the masses effectively channeled the fierce competitiveness of elites … into patterns of behaviour that were in the public interest’. In this way, the Athenians were able to reap the benefits of having elite advisors – which were necessary for policy in a direct democracy – while preventing the elite from becoming a ruling elite – because their power was always provisional and subject to the dêmos’ delegation.

For analytical purposes, we make explicit three implicit assumptions in the M&E model:

• Assumption 1 (sociological assumption): Litigation in Athens is a game played by elite litigants and mass jurors.

• Assumption 2 (operative assumption): Elite litigants seek to win over their opponents as a means to gain honour.

• Assumption 3 (operative assumption): Mass jurors have monolithic preferences.

In this chapter, we draw on the findings of two separate bodies of literature, one in classics, and one in political science, to put pressure on these assumptions. Our goal is to provide a more nuanced account of the dynamics regulating decision-making processes in the Athenian law-courts.

Before we continue, however, a note of clarification is in order.

The Problem of Economic and Political Development

Success in economic as well as political development depends primarily on improving institutions. This has become the consensus among economists over the last twenty years, as the world has witnessed many development failures in spite of abundant capital, natural resources, and educated populations, who emigrate or stagnate if institutions do not put them to good use. The question now is: What institutions are right? As elaborated later in this chapter, some argue that developing countries should emulate the institutions of the most successful, high-income economies of the OECD. We and others, however, see evidence that most low- and middle-income countries are not ready to utilize many Western European or North American institutions or that these institutions function very differently if transplanted into these low- and middle-income economies.

The purpose of this volume is to develop and apply an alternative framework for understanding the dynamic interaction of political, economic, and social forces in developing countries, which was first laid out by North, Wallis, and Weingast (2009, hereafter NWW). The standard approach begins with neoclassical assumptions that growth will occur whenever profitable opportunities present themselves unless the intervention of political or social impediments prevent markets from working. In contrast, the alternative perspective presented here begins with the recognition that all societies must deal with the problem of violence. In most developing countries, individuals and organizations actively use or threaten to use violence to gather wealth and resources, and violence has to be restrained for development to occur. In many societies the potential for violence is latent: organizations generally refrain from violence in most years, but occasionally find violence a useful tool for pursuing their ends. These societies live in the shadow of violence, and they account for most of human history and for most of today’s world population. Social arrangements deter the use of violence by creating incentives for powerful individuals to coordinate rather than fight. The dynamics of these social arrangements differ from those described in neoclassical models, and this difference limits the value of the neoclassical tools for understanding the problems of development.

Thinking of developing countries as limited access orders with their own social dynamic rather than as flawed or incomplete open-access societies affords new insights into the impediments and paths to development. The perspective distinguishes between two development problems that are normally conflated. The second development problem involves the transition of societies from LAOs to OAOs. The first development problem involves the movement of LAO societies toward forms of social organization that enable more economic output, reduced violence, stable political outcomes, and greater individual well-being. World Bank borrowers face the first development problem: developing as an LAO, from fragile to basic and from basic to mature LAO, while avoiding regression. The lessons we draw from the case studies presented in this volume are primarily concerned with enabling places like the DR Congo to accomplish social outcomes that more closely resemble Mexico or Zambia. We also draw lessons about making transitions to open access, but our primary focus is on the first development problem because it is first in terms of human priorities. Understanding better the logic of limited access societies and the dynamics of how they change holds out greater rewards in terms of reducing poverty and violence.

The control of violence is central to the logic of all LAOs and hence is central to the problem of development. The traditional economic development framework focuses mainly on the second development problem and fails to understand violence or incorporate an appreciation of the dynamics of violence into policy recommendations. Indeed, the Washington consensus of the 2000s was dominated by efforts to embed institutions of open-access orders – property rights, entry into markets, elections, or institutions of good governance – directly into limited access orders. Because these reforms ignore the logic of the LAO, they often fail to produce development and sometimes exacerbate the problem of violence. The traditional development perspective typically treats violence as a country-specific phenomenon and leaves dealing with violence for local police and courts. By doing so, this perspective fails to understand that LAOs are organized to prevent violence and that this often hinders traditional reform efforts.

This chapter specifies the institutional conditions for an autonomous judiciary. It seeks to address the question, when will judges act independently of elected officials? Although scholars agree that judicial autonomy is an essential condition for the rule of law in presidential systems, no consensus exists about the circumstances under which it occurs. We argue that when the executive and legislative branches are united against the courts, the courts have few resources with which to defend an independent course, which may include arbitrating interbranch disputes and upholding rights. In contrast, when significant and sustained disagreements arise among elected officials – such as take place under divided government – judges have the ability to challenge the state and sustain an independent course, with little fear of political retribution.

We seek to demonstrate that a country's position on the judicial autonomy continuum depends on more than so-called parchment barrier guarantees of life tenure (or some other long-term length) or protections against salary reduction. Informal practices that allow elected officials to control the courts often overshadow formal (constitutional) guarantees of judicial independence. Institutionalized subconstitutional practices can shape the incentive structure facing judges so that they are unlikely to oppose government policies. These subconstitutional practices can include withholding funds from the judiciary, imposing limitations on the jurisdiction of the courts, or instituting more drastic measures such as removing judges and court packing. Unified government permits the president and congress to employ these practices or to threaten to do so to subordinate the courts.