Law and development

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Law and development is the study of how law and rules affect economic and social progress, and how laws can be used to promote growth and well‑being. The idea that law matters for development goes back about 250 years. Adam Smith warned that bad laws and unclear rules slow trade. Max Weber stressed the importance of “rational” law in economy and society. Friedrich Hayek argued that liberty, supported by good legal rules, is a prerequisite for development.

The field grew out of development aid activities in the mid-20th century. The United States government, the World Bank, and private foundations worked with governments in developing countries to reform laws. In the 1960s, agencies like USAID and the Ford Foundation funded law reform projects. Economists led the effort, and law reform became a popular part of development work. Law schools and legal scholars produced many articles about how legal changes could boost development. This was called the law and development movement.

The movement never formed a single, consistent field. In the first decade, many people thought law reform would help a lot, and some officials even declared the effort a success. But after about ten years, key scholars and funders said the movement failed. It was revived in the 1980s with neoliberal ideas that favored privatization, trade liberalization, and a stronger rule of law, backed by big investments from the World Bank, USAID, and other donors. However, these reform projects were criticized for not working well in many places and sometimes causing harm.

Three main critiques emerged:
- Universality: liberal legal ideas often didn’t fit local cultures and contexts.
- Formal law: simply changing laws on paper could miss the power of informal rules and practices.
- Inequality: reforms could empower elites and stifle protests, rather than help ordinary people.

A core problem was that reform programs were designed without understanding how law changes actually affect development in different places, where many socio‑economic factors matter.

To advance the field, the Law and Development Institute started in 2009, and the Law and Development Review began in 2008 as a dedicated journal. Some scholars argued that the field lacked a clear theory or guiding principles. Yong‑Shik Lee proposed a General Theory of Law and Development that sets out how law affects development through regulatory mechanisms. This theory has been used to study countries such as South Korea, South Africa, the United States, and Botswana, and more recently to apply law and development ideas to problems in wealthy countries as well.

Law and development is also linked to comparative economics, which looks at how institutions shape economic outcomes. This work examines why some reforms work faster than others, the impact of colonial legacies, and the politics of choosing institutions. The idea of an “ease of doing business” index, developed by economists at the World Bank and partners, reflects this line of research. Today, scholars also focus on the gap between laws on the books and how laws are actually practiced.