01/23/2017 Colloquium Series - F. Andrew Hanssen: “Engineering the Rule of Law in Ancient Athens”

Scholars typically regard the “rule of law”—a stable and predictable process by which laws are implemented, enforced, and changed—as a cornerstone of good governance and a key factor supporting economic growth. Yet much remains unknown as to why only some societies have successfully established the rule of law in a durable and reliable form. In this paper, we develop a model in which the value of using a stylized “law” to constrain future majority-rule decisions depends on expectations about the way new information (in the form of random shocks) will influence both the net social benefits and the distributional consequences of policy decisions. We apply the model to what was perhaps the first rule-of-law state: Athens in the 4th century BCE. The Athenians established a rule-of-law system after operating quite successfully without one in the 5th century BCE. Athenians chose to adopt the rule of law, we argue, because losing the Peloponnesian War eliminated a major source of wealth (tribute payments from the Delian League), thereby increasing the importance of voluntary exchange and complex contracts.