Muslim Spain

APPLYING NORTH'S LAWS OF MOTION TO THE EDGE OF THE WEST

Saad Azmat

This paper uses Douglass North's theories of institutional economics to explain progress in Muslim Spain. It argues that it was efficient economic institutions in the guise of a free-market economy where the property rights of different strata of society were well protected, which ensured lasting prosperity. This paper postulates that while a population explosion could have been responsible for the initial growth in Spain, it was an efficient formal-informal institutional matrix that ensured a high level of long-Term growth.

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Keywords: Market economy, institutional economics, Douglass North,

Muslim Spain.

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New institutional economics

In the literature on institutions a fine line has been drawn to make a distinction between formal and informal institutions, and the importance of each one has been extensively argued. Mantzavinos (2001, p. xi) simply refers to institutions as 'nothing more than shared problem solutions that individuals have acquired while interacting with their environment'. North (1994) argues that there exist both formal and informal institutions. Informal ones are comprised of things like norms and self-imposed restrictions; formal ones include laws, constitutions, etc. The argument in support of the importance of institutions has also been obliquely substantiated by Coase (1937), who argues the case for the existence of firms and markets by referring to transaction costs, under the presence of which a formal institution (such as a market) is required to minimise these costs. Coase (1960) further extends the argument for the prevalence of other institutions such as the government, by referring to the existence of externalities that might not be internalised efficiently by private individuals in the presence of transaction costs...