Our next comparative static analysis of how changes in the nature of the production function affect the transition to equality before the law. As discussed in the introduction, several historical examples—notably episodes of “defensive modernization” in nineteenth-century Prussia, Japan, and the Ottoman Empire—suggest that reforms that lead to greater equality before the law take place when a society faces external threats that require intensified industrialization or rearmament. As far as our model is concerned, this corresponds to an increase in the slope of the functions |$f_{N}$| and |$f{E}$|: that is, an increase in marginal returns to effort (the need to increase output), but not in average yields (the productivity of the economy). The evidence shows that if |$alpha$| is so small that the elites do not find it in their interest to make efforts under the elitist regime, the normal well-being of the agents increases the coercive capacity g to a threshold |$g^{ast }ge 0$| then decreases in g. The logic is that a low but positive level of g increases the normal effort of the agent from the inefficiently low level that | to |$g = $0 admission. Towards the first best level, but if g is too high, normal agents are forced to make efforts above the first level. Thus, while the stimulating effect of state enforcement may dominate when coercion is limited, inequality prevails and normal actors are worse off when coercion is too intense. This article is a first step towards the development of a theory of the rule of law. The focus is on the emergence of an essential component of the rule of law: equality before the law.
Our approach is to model the organization of society through a repeated game in which cooperation and the provision of the common good must be encouraged. One way to achieve this – reminiscent of the organization of stateless societies – is to uphold communities, based solely on the carrot of future cooperation: actors who make the necessary effort will benefit from future cooperation, and those who deviate from it are excluded from these benefits. Another way to organize society is to combine this carrot with the stick of coercion, which directly imposes costly sanctions on those who deviate from laws or social norms. We assume that, as has almost always been the case in history, centralized states are initially under the control of a subset of privileged actors – the “elite” – and that coercive punishment favors this group. Unlike the low levels of coercion and limited inequalities that prevail under the application of communal law, under elite domination, coercion and inequality are high, supported by laws and norms, both of which benefit the elite. Elites are “above the law” in the exact sense of immunity from coercion. Perhaps highlighting some important debates in anthropology, we show that the transition from communal application to elite rule (or more generally to increasing coercive capacity under elite rule) can increase or decrease the well-being of ordinary actors: productive effort increases, but inequality also increases. If a condition (1) or (2) is true, a shift of political power from less productive elites to more productive elites (interpreted as an increase in Pareto`s weight to more productive elites in a planning problem) increases the efforts of all actors and increases equality before the law. The reason for this is that when highly productive elites make less of their own efforts or value the normal efforts of agents higher than low-productivity elites, they are more inclined to exchange their own efforts for greater efforts for more important normal agents. The Bible says, “You and the stranger will be the same before the Lord; the same laws and regulations will apply to you as well as to the foreigner who lives among you. (Numbers 15.15f) Let`s call it the single solution to the problem of elites – according to the optimal equilibrium under endogenous equality before the law with a minimum |$rho$| – with |$left( x^{{EL}},y^{{EL}},rho ^{ast }right)$|. Here, uniqueness arises from concavence, and exponent |$EL $| means “equality before the law.” The turning point in these efforts was the Meiji Constitution, drafted in the 1880s and finally enacted in 1890 (Jansen, 2002, pp.
365-6). The Constitution introduced concepts such as due process, freedom of movement, freedom of expression and private property for all Japanese. While Japan remained an oligarchic society in the nineteenth century, these changes created a much higher degree of equality before the law. Although there were relatively few ascendant claims at the time and no revolutionary threat from citizens, the Meiji reforms diminished the prestige of the elite (but not that of the Daimyos leaders). According to Jansen, “the samurai certainly experienced the greatest change of all, and most of them were clear losers” (2002, p. 367). That is, in the elitist-optimal equilibrium with endogenous equality before the law, normal agents are always better off than under the elite regime. This is explained by the fact that inequalities are reduced and the effort between all individuals is increased. We emphasize that the elites of our model do not value equality per se, but submit to coercive punishments to engage in higher future efforts when ordinary agents also make more efforts. Since normal agents are initially subject to coercive sanctions, this change corresponds to greater equality before the law.
What triggers the transition from elite rule to equality before the law? While our model highlights a number of factors that influence this trade-off, we believe that the most important is the role of violence in society. We show that as the level of coercive punishment that can be imposed on dissidents decreases – for technological, political or social reasons – it becomes more attractive for elites to renounce their privileges and move towards equality before the law. This follows that the two levers that influence the incentives of ordinary agents, the stick (coercive punishment) become less important and the carrot (the promise of future benefits) becomes more important.8 This changes the compromise faced by the elite and encourages them to intensify their own efforts.