Culture, institutions and the long divergence

The article studies the evolution of the constitutional arrangements in seventeenth-century England following the Glorious Revolution of 1688. It focuses on the relationship between institutions and the behavior of the government and interprets the institutional changes on the basis of the goals of the winners—secure property rights, protection of their wealth, and the elimination of confiscatory government. We argue that the new institutions allowed the government to commit credibly to upholding property rights. Their success was remarkable, as the evidence from capital markets shows. Show more

Legitimacy is a psychological property of an authority, institution, or social arrangement that leads those connected to it to believe that it is appropriate, proper, and just. Because of legitimacy, people feel that they ought to defer to decisions and rules, following them voluntarily out of obligation rather than out of fear of punishment or anticipation of reward. Being legitimate is important to the success of authorities, institutions, and institutional arrangements since it is difficult to exert influence over others based solely upon the possession and use of power. Being able to gain voluntary acquiescence from most people, most of the time, due to their sense of obligation increases effectiveness during periods of scarcity, crisis, and conflict. The concept of legitimacy has a long history within social thought and social psychology, and it has emerged as increasingly important within recent research on the dynamics of political, legal, and social systems. Show more