The Rule of Law and economic development are widely regarded as necessary for a successful society, but defining the international rule of law and explaining the relationship with economic development has proven elusive. This article begins with explanations posited by Hayek and others, but brings a fresh perspective grounded in a multidisciplinary and contextual approach that includes history, philosophy, economics, and law. Properly defined, the rule of law refers to a specific understanding of the relationship between the individual and government. The common law conception of the rule of law (as opposed to the civilian Rechtsstaat or L’État de Droit) is historically more supportive of economic development, but modern international descriptions and definitions confuse the two. Based on empirical economic studies and historical legal anthropology, the common law understanding focused on limited government and individual freedom from interference has proven more likely to encourage entrepreneurship and hence economic development on a long-term basis.
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