Trust, institutions and development

Abstract

This article suggests an explanation as to why relatively prosperous societies in the 1500s were unable to protect themselves from the colonialist powers. It reasons that while the prevalence of institutions fostering mutual trust among citizens allowed the earlier prosperous societies to achieve a degree of prosperity that same trust led to lower investments in defence and the eventual fall of the society.

Keywords:

• institutions
• growth
• defence
• trust

JEL Classification:

• B10
• H60
• N00

Acknowledgement

The authors thank Wayne Gauthier and Paul Gentle for editorial assistance.