Seminar 2 (Sept. 18)

I. Property rights and drivers of the industrial revolution

1. In their book, Acemoglu and Robinson (2012, e.g. chapter 7) claim that the British Glorious revolution of 1688 was an important prerequisite for the industrial revolution. What is their justification for this claim? Does it seem reasonable?
2. Economic historian Bob Allen has argued that the reason for the industrial revolution occurring in Britain was their high labor costs and low energy (coal) prices relative to other countries. Discuss this argument. Does it invalidate Acemoglu and Robinson's argument?

II. Contracting institutions

1. Explain what Acemoglu and Johnson (2005) and others mean by contracting institutions, and explain what differentiates them from property rights institutions
2. Try to construct a simple model of two agents who may make a jointly beneficial contractual arrangement, but where such contracts are limited by the possibility of one agent to misbehave (details of the model are left for you to decide upon, but you may benefit from looking at the simple model of property rights institutions considered in the first lecture)
3. Could your conclusions from Question ii) change if the parties meet regularly? 
   Hint: Drawing on the folk theorem may help you construct an argument here.
4. Can the above argument help us understand how mutually beneficial contracts can be implemented even in the absence of a proper legal framework, and use this to try to explain Acemoglu and Johnson's finding that contracting institutions are less important for economic development than property rights institutions.
5. Discuss whether a similar solution is possible for property rights issues, i.e. interaction among the individual and the government.