The Rise and Fall of Enforcement Institutions: An Example of Religion and Secularism

Abstract

Societies in Western civilisation enforce their rules through formal secular institutions (SES), whereas less developed civilisations often rely on informal, often religious, institutions (RES). The present paper attempts to explain the determinants of societies’ choice between different enforcement systems, and their implications for society development using an example of two different enforcement models: one informal (RES) and one formal (SES). We find that, because the RES is based on beliefs, its efficiency depends heavily on its credibility, making it hardly flexible and highly susceptible to conflicts in dynamic environments. In contrast, because under the SES societal rules are enforced through a formal legal enforcement sector, the SES is more flexible, although also more costly than the RES. The empirical evidence strongly supports our findings that wealthy, dynamic and fast growing economies typically choose the SES for enforcing societal norms and rules.