The Role of the Chinese State in Long-distance Commerce

The new institutional economics offers a bold and simple argument for how states promoted commercial expansion in early modern Europe. Focused on the importance of secure property rights for reducing transaction costs, commerce expands much as an engine burns fuel more efficiently and creates more power when it is well-tuned and oiled. Reliable and defensible property rights emerge out of legal systems that specify and enforce the expectations and obligations of parties to contracts; the main contribution of government to commercial expansion is thus supplying the formal framework that reduces certain types of risks that merchants encounter in their trade activities.[...]