It is widely accepted that good institutions caused the massive increase in living standards enjoyed by ordinary people over the past two hundred years. But what caused good institutions? Scholars once pointed to the polycentric governance structures of medieval Europe, but this explanation has been replaced by arguments favoring state capacity. Here we revitalize the ‘polycentric Europe’ hypothesis and argue it is a complement to state capacity explanations. We develop a new institutional theory, based on political property rights and what we call polycentric sovereignty, which explains how the medieval patrimony resulted in the requisite background conditions for good governance, and hence widespread social wealth creation.

By Alexander Salter & Andrew Young. Read the whole excellent thing here. I wonder how much the author’s conception of “polycentric sovereignty” has in common with Madison’s compound republic?

Salter & Young do a great job bringing decentralization back into the overall “economic growth and political freedom” picture. Over the past two decades, political centralization as a good thing has been making a comeback under the guise of “state capacity.” This isn’t a bad trend, but it has left several large gaps in understanding how economic development and political freedom works. (For example, how to prevent centralized states from pursuing illiberal ends, or using illiberal means to pursue supposedly liberal ends.)

This article brings decentralization back into the picture, using Elinor and Vincent Ostrom’s conception of polycentricity as a model. However, I don’t think they spend enough time on Vincent Ostrom’s understanding of the American compound republic. The American federalists were concerned with exactly the same thing that we are concerned about now: how to maintain a proper balance of centralized power and decentralized power so that liberty may flourish. I’ve emphasized the important part with italics. The liberty aspect gets de-emphasized to make room for the sexier “economic growth” aspect, but political freedom is still paramount when it comes to thinking through matters of politics.

The American federalists, and especially Madison, came up with the compound republic to address the centralized/decentralized debate. Scholars continue to underrate its genius and usefulness for capturing humans as they are. Ostrom’s book on the Madisonian compound republic is worth your time and money. Read it in tandem with this book on the Federalist Papers and this book on the formation of the American republic and this short paper on the continued viability of the compound republic to today’s world. Once you’ve done the readings, start writing (or better yet: blogging!).