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Rule Of China Law And GDP. Was It The Chicken Or The Egg?

By Dan Harris and Steve Dickinson

The Economist Magazine has a really cool graph showing a pretty much direct (and not surprising) correlation between GDP and the rule of law (h/t to Experience not Logic). It would be nice to be able to use this correlation to argue for rule of law, but it just is not clear that rule of law leads to wealth, rather than the reverse, which is what I suspect:

The rule of law is generally held to be not only a political good but also a cause of other good things, notably economic ones. Daniel Kaufmann, head of the World Bank's World Governance Institute, has looked at the results of three separate studies (one he co-wrote) which consider measures of GDP per person and the rule of law. After putting them on a comparable basis, the causal link is clear. The better a government upholds the rule of law, the more likely its people are to be richer: every rich country, with the exception of Italy and Greece, scores well on rule-of-law measures. Most poor countries do not. But a link between the rule of law and growth has been much tougher for economists to establish, as China demonstrates.

What do you think?

Full post as published by China Law Blog on March 15, 2008 (boomark / email).