A model of a rule of law and a rule of man: Implications for the design of institutions

Findings of cross-cultural psychology suggest that different approaches to rule enforcement have cultural roots. Individualist societies have established a rule of law, in which rules prevail; collectivist societies have a rule of man, which allows discretionary rule enforcement, which, in turn, is recognized as an obstacle to sustained increases in productive long-term investment in developing countries. This paper presents a model that offers a unified framework to explain rule enforcement as social optimization processes in both individualist and collectivist societies and, on this basis, highlights the essential differences between a rule of law and a rule man (i.e., between rules and discretion). The paper uses this framework to show that cross-country variations in rule enforcement are explained to a considerable extent by cultural values. The paper then uses the framework to show how the imported multi-stage rule enforcement institutions based on separation of powers in vertically-oriented collectivist societies, unlike in the individualist societies from which they originate, might not ensure as low a degree of discretion as intended. Finally, the paper uses these results to explore practical ideas that would help collectivist societies benefit from rule enforcement with low discretion.