Institutional Change and Magna Carta
Amid some thoughts on the recent Nobel Prize
How do we get “good” institutions? This question has been the theme of my recent research (see here). And together with Desiree Desierto and Jacob Hall, I’ve just finished a new draft of our paper Magna Carta, which I’m excited about.
Now is a good time to revisit this topic in light of the recent Nobel Prize awarded to Daron Acemoglu, Simon Johnson, and James Robinson (henceforth AJR) for the study of institutions.
The Effects of Institutions or the Emergence of Institutions?
The majority of initial attention on AJR’s work focused on the effects of institutions. The authors of scientific background for the prize state this clearly:
In two seminal papers from the early 2000s, Acemoglu, Johnson, and Robinson provided compelling evidence on the crucial impact of conditions during colonization on long-run prosperity. They also showed that these conditions shaped the type of institutions established by European colonizers, and that the impact on long-run prosperity can plausibly be tied to the type of institutions chosen by the colonizers.
And, as many people have observed, these two papers have been hugely influential. Again, the Nobel committee:
These two papers shaped the subsequent empirical research agenda along a number of dimensions. First, they moved the literature from examining the proximate correlates of growth – for example, savings rates, productivity, and human capital – to examining the fundamental determinants of growth, such as institutions. Second, they introduced a new standard by illustrating the power of an explicit empirical research design for identifying a causal relationship pertaining to a broad macroeconomic question. Third, they pioneered a new literature on the historical determinants of contemporary institutional quality, productivity, innovation, and growth, using quasi-experimental research designs.
While scholarship has moved beyond the findings of these specific papers, their influence is undeniable. They made possible subsequent research such as Nathan Nunn’s work on slavery and Melissa Dell’s work on the Peruvian Mita, two major contributions to our understanding of persistent underdevelopment.
But while much of the profession became interested in the effects of institutions, less attention has been paid to the question of institutional change. Why was this? I think the answer is simple: studying the effects of institutions allowed economists to deploy the new causal inference tools developed in the 1990s and early 2000s. IVs, DID, and RDDs could be fruitfully used to disentangle the effects of institutions from other factors such as human capital, geography or culture. The main reason why the cross-country growth agenda of the 1990s floundered was due to problems of endogeneity. The application of the credibility revolution (especially using within-country variation) offered a path forward, a path that many applied economists have followed.
While most media attention has focused on this research agenda, the Nobel committee does draw attention to some of the other contributions of the Nobelists and particularly to Acemoglu and Robinson’s seminal work on democratization, which has been hugely influential in political science.
The main idea is captured in this figure, courtesy of the Nobel Prize Committee. Revolutionary pressure from below threatens existing elites. These elites cannot simply promise to redistribute resources to head-off this threat, as their promises are not credible. Therefore, to credibly commit to redistribute, they also have to share power; that is, they have to extend the franchise and eventually to democratize.
The main application of Acemoglu and Robinson’s work on democratization is to the 19th and early 20th centuries. The canonical case-study illustrating their theory is the UK, where elites successively extended the franchise in response to a revolutionary threat (see here for empirical evidence).
Now, while I think this work is great, I’ve always been drawn to earlier periods of history. As an undergrad, I studied Late Antiquity with Bryan Ward-Perkins1, and most of my research looks at medieval or early modern Europe. From this perspective: everything was set in place long before the 19th century. The roots of modernity and of liberal democracy go much deeper than the Great Reform Act or the French Revolution. We need to consider earlier periods of history.
The Medieval Origins of Inclusive Institutions
AJR, of course, have studied earlier episodes in European history too. Their work on the impact of Atlantic trade on the rise of parliaments in Northwestern Europe builds on the earlier scholarship of both new institutional scholars like Douglass North and Barry Weingast, but also Marxian historians like Robert Brenner. But the origins of parliaments and similar institutions goes back to medieval Europe.
AJR comment on this in their handbook chapter Institutions as a Fundamental Cause of Long-Run Growth:
“Our first example is the rise of constitutional monarchy in Europe. In the medieval period most European nations were governed by hereditary monarchies. However, as the feudal world changed, various groups struggled to gain political rights and reduce the autocratic powers of monarchies. In England, this process began as early as 1215 when King John was forced by his barons to sign the Magna Carta, a document which increased the powers of the barons, introduced the concept of equality before the law, and forced subsequent kings to consult with them.” (p. 452)
In fact, Why Nations Fail mentions Magna Carta 11 times! In The Narrow Corridor, Acemoglu and Robinson similarly view it “the foundation of England’s political institutions” (p. 174) and “a statement of some critical political principles” that was “continually reaffirmed by subsequent kings and assemblies” (p. 176). But they don’t analysis how the Magna Carta came about. Indeed, Magna Carta2, and its role as the ground zero for English Parliamentary history has not been seriously studied by social scientists. This is what we set out to do in our paper.
Magna Carta as a Constitutional Contract
Magna Carta or “The Great Charter” (a reference to its relative physical size, rather than its significance) didn’t arise in response to a revolutionary threat from below. Understanding it requires an entirely different model to that proposed for constitutional moments in the modern era. This was elite driven institutional change.
The main question we are interested in is: how was an agreement like Magna Carta possible? And which elites drove this process of institutional change?
The key insight for us was the realization that Magna Carta was the product of a feudal environment. Each of the barons who rose against King John in 1215 had their own armed retinue., their own military power. The monarch had no monopoly of legitimate violence. Feudal rulers governed coalitions of elites. In the feudal world, barons could withdraw support from an unpopular or oppressive ruler. Conflict between barons or between the barons and the king were common. John’s father Henry II had faced a major baronial revolt in 1173-1174.
John was a highly extractive ruler by contemporary medieval standards and he oppressed his barons through his selective and arbitrary enforcement of the legal system. The elites were the main victims of his abuse of the feudal system but non-elites also felt the hand of royal oppression. Two notorious examples of this were the Exchequer of the Jewry and the Royal Forest.
Restricting on lending money at interest (usury) encouraged the royal monopolization of Jewish moneylending. The king protected Jewish moneylending in return for getting a cut of the profits. But the biggest benefit to the King was being able to tax (“tallage”) the Jewish community when he needed a quick source of cash. This system oppressed both Jews and Christians alike and was mentioned in Magna Carta as a prominent grievance.
Another source of cash for the King was the royal forest. The royal forest covered at least one quarter of the kingdom (Roweberry 2016, p. 518). Nominally it was there so that the King could hunt freely, but in reality its main purpose was to provide the king with additional revenue. Anyone who hunted in the royal forests or even took firewood from them was liable to fined or punished. Royal officials could sell exemptions to these restrictions or accept bribes to overlook violations. The legend of Robin Hood testifies to the lasting unpopularity of the institution. We depict John’s revenue from the royal forest below.
Why did John need all of this money? The primary reason for his exactions was the need for funds to reconquer Normandy, which he had lost to the French King. In our paper, we develop a model to explain how the shock of his defeat in France in 1214 at the Battle of Bouvins acted as the spark that enabled a coalition of rebellious barons to form.
Each baron had their own reason for joining or not joining the rebellion. But critically, they had to think that the rebellion coalition had a chance of success. We argue that the key metric for a successful rebellion was the amount of resources in the rebel coalition that could be safeguarded from the king. We call these “non-appropriable” resources. Empirically, our main measure of these non-appropriable resources is the number of castles under rebel control.
Castles played a critical role in the feudal world because they made the land nearby defensible. Baronial castles enabled their owners to rebel from the King’s coalition without having their lands raided. Castles could be taken, but only with a costly siege.
In our regression analysis, we find strong support for this hypothesis. Looking within a baron’s family network, we find that a one standard deviation increase in the number of castles among rebels in a baron’s family network is associated with a 63% increase in the probability of the baron joining the Magna Carta rebellion. We find similar results when we instrument for baronial castles by using the distribution of castles in previous generations and when we use alternative proxies for non-appropriable resources.
What Does This All Mean?
Returning to the recent Nobel, back in 2005, AJR proposed a famous schematic for thinking about institutional change:
The key insights they drew were as follows. First, that economic institutions, though of central importance, were endogenous to political institutions. Second, while persistence in both economic and political institutions was highly likely because large changes in the distribution of political power were required to generate institutional change, “shocks” to de facto political power could bring about dramatic episodes of institutional change.
Our analysis of Magna Carta fits within this broad framework. First, the existing institutions of medieval feudalism have to be understood in order to understand what type of institutional change was possible. Land remained the dominant form of wealth. The majority of the population were serfs who had no economic or political power. The merchant class was small and outside of the city of London had no political representation or power. Perhaps most importantly, the state of military technology favored mounted knights. Given this, the only source of meaningful pressure for institutional change was from within the military and economic elite i.e. the barons.
Nonetheless, no matter how extractive or oppressive John was as a King, there could be little opposition to his rule so long as the majority of powerful barons were loyal. What shocked this was the (largely) exogenous fact of the defeat of his forces at the Battle of Bouvines in 1214. This was indeed a critical juncture. It confirmed the loss of Normandy and Anjou while cementing Philip II’s unification of France. In England it dealt a major blow to John’s prestige and reputation, acting as the catalyst of the formation of the rebel coalition that we study in the paper.
Our model allows us to investigate other conditions that made an agreement like Magna Carta feasible. In addition to John being highly extractive, another important precondition was the relatively egalitarian distribution of resources among barons. We provide evidence that compared to either earlier or later periods of English history, land was quite evenly distributed among England’s barons. There was no “mega-baron” who could plausible replace the king. The best deal that any potential baronial leader could get was one that limited the power of the monarchy.
As suggested by AJR’s framework, however, the process of institutional change in medieval England was a gradual one. Magna Carta set limits on the arbitrary power of the king. But it did not revolutionize English institutions. The legal protections it promised to ordinary Englishmen and women took centuries to realize, and England’s move towards more inclusive institutions was intermittent. John soon reneged on the Great Charter. Two baronial wars (1215-1217) and (1264-1267) had to be fought over the principles articulated in Magna Carta - and in a follow-up post, I may cover the remarkable career of Simon de Montfort in the second of these - before the principle of calling Parliament to grant new taxes came to be established.
Nonetheless, by imposing limits on royal power, Magna Carta was critical in establishing important precedents. Subsequent medieval monarchs honored it. I like the following anecdote about Edward I, in many respects a brutal and imperious ruler. When a young man called Thomas Bardolf offended the king by refusing to go through with a marriage Edward had arranged, the
“. . . chancellor was therefore instructed ‘to be as stiff and harsh towards Thomas in this business as can be, without offending the law”
As Marc Morris, Edward’s biographer notes what is “striking in this instance, is that, even as he instructed his chancellor to be partial, Edward reminded him to stay within the limits of what was legal” (Morris, 2008, 367).
It was this adherence to legality and to at least the appearance of the rule of law that laid the foundations of England’s subsequent institutional trajectory. [Even if this tradition had to be rediscovered by the likes of Edward Coke in the 17th century after a period of centralization and growing royal power under the Tudors.]
Author of the much admired The Fall of Rome and the End of Civilization.
Strictly speaking, it should be “the Magna Carta”. But for convenience both here and in the paper, I often abbreviate the “the”.
Thank you for an interesting and informative post. There is nothing better than learning history, economics and politics all while being entertained!