Role of Law

INTRODUCTION
Before the Code of Hammurabi in ancient Mesopotamia, people followed rules to
organize social and economic activities, either through mutual agreement or force.
As societies grew larger and more complex, the need for formal rules became
essential.
In modern states, law plays three critical governance roles:
1. It regulates the behavior of individuals and organizations to turn economic
and social policies into outcomes.
2. It defines the structure of government by distributing authority and power
among government actors and between the state and citizens.
3. It provides mechanisms for accountability, peaceful dispute resolution,
and rule changes.
The rule of law, which requires that both government officials and citizens act in
accordance with the law, is fundamental to good governance and the realization of
social and economic potential. Empirical studies show that law and legal institutions
are crucial for improving institutional functioning, enhancing growth, securing
property rights, improving access to credit, and delivering justice. However, merely
having formal laws does not guarantee their effectiveness. In many developing
countries, laws may remain unimplemented, selectively enforced, or impossible to
enforce. "Good laws" might lead to bad outcomes, and laws can be used to
perpetuate insecurity, stagnation, and inequality. Examples include South Africa's
apartheid system and the use of constitutional amendments by authoritarian
leaders to legitimize undemocratic rule. Additionally, laws intended to secure property
rights can sometimes privilege powerful actors at the expense of the vulnerable, such
as rural farmers or marginalized groups.
Law is a double-edged sword: while it can reinforce existing social and economic
relations, it can also be a powerful tool for those seeking to resist, challenge, and
transform those relations. At all levels—local, national, and global—states, elites, and
citizens increasingly use law to negotiate, establish, and challenge norms, policies,
and their implementation. Law provides a structured and formal language for defining
and ordering things, which gives it the potential to evolve beyond its original purposes
and become an independent force. As a product of social and power relations, law can
also be a tool for reshaping them by changing incentives, coordinating beliefs, and
making the policy arena more contestable.

Law and the Policy Arena

Like policy, law does not exist in isolation. Its nature and effectiveness are largely
shaped by the dynamics of governance in the policy arena. The success of law, or
"words on paper," in achieving its goals depends on the presence of a credible
commitment that coordinates expectations and promotes cooperation for public
goods. This effectiveness is influenced by the interests of elites and prevailing social
norms. The question of what defines law has long intrigued legal scholars,
philosophers, and sociologists. Theorists have debated its essence, including its
relation to custom and social order, its dependence on state-backed coercion, and its
connection to justice.
This Report avoids philosophical debates and defines "law" in its conventional sense
as positive state laws—official laws on the books at the national or subnational level,
whether passed by a legislature, enacted by fiat, or otherwise formalized. The term
refers to de jure rules. The operation of law involves a legal system with actors and
processes responsible for making, interpreting, advocating, and enforcing the law,
including legislatures, judicial and law enforcement institutions, administrative
agencies, the legal profession, advocates, and civil society groups. State law is just
one of many rule systems that govern behavior, authority, and contestation, alongside
customary and religious law, cultural and social norms, and other functional or
economic normative systems. Legal and normative pluralism can present both
challenges and opportunities.
Plural normative systems can complement state laws by providing order where
state institutions are inaccessible, reducing the burden on these institutions, and
accommodating diverse preferences. For instance, community mediation of land
disputes, customary or religious handling of personal matters, and business
association arbitration can support the state legal system. However, multiple rule
systems can also create confusion, undermine order, and lead to negative outcomes.
This occurs when people cannot rely on consistent rule enforcement, as seen in West
Africa, where competing legal authorities have significantly increased the likelihood of
violent land conflicts. When state laws sharply differ from prevailing social norms,
they are less likely to be followed and may erode trust in the state.
Pluralism can contribute to positive development outcomes by enabling contestation
and shaping preferences. Historically, social entrepreneurs and intermediaries have
skillfully navigated and combined various legal and normative claims to advance their
goals. Legal pluralism, therefore, broadens the platforms and languages through
which power struggles occur. For example, in India's Gujarat and Uttar Pradesh
states, advocate groups established informal women's courts (nari adalats) to offer
alternative legal avenues for women facing domestic violence. These courts allowed
women to use community norms, state law, and international human rights to
challenge unequal power relations and influence emerging norms. The interaction of
law, norms, and power is key to understanding how law supports persistence or
change in the policy arena's core roles.

Box 3.1) What is Law?

The question "What is law?" has been addressed by many theorists, whose definitions
generally fall into three categories, originally outlined in Plato's Minos:

1. Principles of Justice and Right: Advocated by natural lawyers like Thomas

Aquinas, who believe that law is defined by its morality, justice, and fairness.
Under this view, unjust or evil laws do not qualify as true law.
2. Institutionalized Rule System: Promoted by legal positivists like H.L.A. Hart,
who define law as a system established by governments, consisting of
substantive laws (primary rules) and rules on how these laws are made
(secondary rules), regardless of their justness. In this view, even unjust legal
systems are considered law, but customary and international law, lacking
centralized enforcement, are not fully recognized as law.
 3. Fundamental Customs and Usages: Supported by anthropologists and
sociologists like Eugen Ehrlich and Bronislaw Malinowski, who focus on
customary or "living law." They argue that law is not necessarily tied to an
organized legal system but can include the central rules guiding social
interactions.
Three key debates arise across these conceptions:
i. the normative value of law,
ii. the systematic form of law, and
iii. the function of law.

Box 3.2) Legal and normative Pluralism

"Legal pluralism" refers to the coexistence of multiple legal systems within a single
community or sociopolitical space. This phenomenon has existed throughout history
and persists in both developing and developed countries. Modern legal pluralism often
stems from colonialism, where Western legal systems were imposed on colonists while
traditional systems were retained for indigenous populations. In many parts of the
developing world, particularly in Africa, customary law still dominates areas such as
social regulation, dispute resolution, and land governance. Some countries, like
Ghana, South Africa, and South Sudan, formally recognize and incorporate customary
law into their legal systems. In others, customary law remains the primary means of
social ordering in the absence of effective state systems, as seen in Afghanistan,
Liberia, and Somalia.

Customary legal systems reflect the dominant, yet evolving, values and power
structures of their societies, but they may fall short of modern standards of non-
discrimination, rights, and due process. The legitimacy and effectiveness of these
systems are relative and depend on the available alternatives.

Another source of normative pluralism is social norms, which are widely accepted
rules of behavior within social groups. Although less visible than codified laws, social
norms greatly influence behavior by coordinating expectations and using social
sanctions to enforce cooperation and prevent anti-social behavior.

Additionally, in today's interconnected world, many global actors create and spread
rules that affect local experiences of law. These rules, covering areas like trade, labor,
environment, and human rights, can be binding international treaties (hard law) or
voluntary standards (soft law). They may reinforce, complement, or compete with
state law in governing public and private spaces.

Ordering behavior: The command role of law

This section explains how law acts as a tool for governments to establish rules
that guide behavior in areas such as criminal, civil, and regulatory domains to achieve
economic and social outcomes. However, whether these laws lead to expected results
depends on how they interact with power, social norms, and the state's capacity to
enforce them.

The text explores three mechanisms through which law influences behavior:
 1. Coercive Power of Law: Using sanctions or punishment to enforce
compliance.
2. Coordinating Power of Law: Acting as a focal point to align individual actions
toward a common goal.
3. Legitimizing Power of Law: Gaining voluntary compliance by fostering a
sense of legitimacy.

These mechanisms rarely work in isolation but together, interacting with social and
political dynamics, to generate commitment and encourage collective action.

1. The coercive power of law: “Incentivizing behavior change through

coercion or sanctions”
The coercive power of law is based on using sanctions to incentivize behavior change.
People generally obey laws out of fear of punishment. According to the traditional
law and economics approach, people will comply if the cost of non-compliance is
higher than the benefits, such as state bureaucrats avoiding bribes due to the risk of
getting caught, or companies following environmental regulations to avoid fines.
Similarly, families might send their daughters to school if the consequences of not
doing so are severe enough.

For this system to work, three conditions must be met:

i. The state must have the capacity to enforce laws consistently.
ii. The law must provide strong incentives to deter noncompliance.
iii. Those with power must align with the law’s implementation.

For example, anti-bribery laws require not just a credible threat of enforcement but
also support from private enforcement mechanisms like whistle-blowing. However, too
weak or too strong sanctions can either be absorbed as part of doing business or
discourage whistle-blowing altogether.

Enforcement can be further undermined by powerful interests benefiting from

non-compliance, or by conflicting social norms.
In Cameroon and Niger, meritocratic civil service laws failed because of cultural
norms protecting rule-breakers. Similarly, India’s laws against gender-based violence
have had limited impact because societal norms supporting practices like dowry are
stronger than legal punishments.

Laws can also produce unintended consequences. In Timor-Leste, rigorous

domestic violence laws reduced reporting due to social stigma, and in the U.S., stricter
domestic violence arrest laws correlated with higher intimate partner murder rates.
India's death penalty for rape may discourage women from reporting rape due to
increased social pressure.

An effective legal compliance system requires significant investment in infrastructure

and careful design of incentives. Even with these efforts, enforcement faces
challenges from power dynamics and conflicting social norms, leading to the need for
other mechanisms like coordination and legitimacy to influence behavior.

Box 3.3) Legal origins: Theory and practice

The legal origins theory, proposed by La Porta and others, suggests that countries
that inherited common law systems (typically from British colonial rule) tend to
have stronger investor and creditor rights, lower legal formalism, more
efficient contract and debt enforcement, and greater judicial independence
compared to countries with civil law systems (like those inherited from French or
other European colonial powers). Common law's adaptability and focus on private
property rights are seen as advantageous for dynamic market economies.
However, empirical evidence shows no clear link between changes in legal rules and
economic outcomes. For example, reforms to imitate common law did not
significantly affect economic performance, as evidenced by weak correlations
between "Doing Business" indicators and enterprise surveys.

Studies by Oto-Peralías and Romero-Ávila argue that common law does not always
result in better legal outcomes than French civil law, especially in regions with high
precolonial population density or settler mortality. Additionally, the form of colonial
rule—such as whether British colonial law was deeply embedded in local contexts or
remained superficial—plays a bigger role in shaping postcolonial legal outcomes than
the mere origin of the legal system. For example, the impact of British colonial law
varied based on how it was adapted to local conditions, highlighting that governance
dynamics and historical context are more important for economic performance than
the specific type of legal system.

In essence, while legal origin influences legal systems, the success of those systems
in supporting economic growth depends more on local governance, power
dynamics, and how laws are implemented, rather than the type of legal system
itself.

2. The coordinating power of law: “A focal point for change”

The coordinating power of law, also known as the expressive power, shapes
behavior by acting as a focal point for coordinating actions. Law functions as a guide,
especially in cases where people have several behavioral options. For neutral
activities, like driving on a certain side of the road, compliance happens easily as it
facilitates safety. However, for more controversial issues, law must shift deeply held
norms to act as the salient point of behavior.

For example, the global success of smoking bans demonstrates how laws can
empower non-smokers to pressure smokers, leading to a shift in societal norms where
smoking in public became socially disapproved without much enforcement. This
reflects a norm bandwagon effect, where growing support for a new norm causes
the old one to lose legitimacy.

Gradual norm shifts require a critical mass of supporters who engage in collective
action. Formal laws can strengthen those aligned with legal rules during local norm
contests. For instance, Ghana's inheritance law was introduced despite conflicting
with customary systems but gradually led to social change. Similarly, Senegal's ban
on female genital mutilation helped shift societal views, though it also had
unintended negative consequences by pushing the practice underground.

The power of law to shift norms depends on the incentives it provides and supportive
programs like education and awareness campaigns. In India, the introduction of
gender quotas in village councils initially met resistance, but over time, exposure
to female leaders improved perceptions and increased women's participation in
leadership and entrepreneurship.

Laws can shift norms over time, but they need development and income levels to
effectively support the change. For instance, child labor regulations became more
effective as household incomes increased. In contrast, religious or philosophical
norms tend to be more resistant to change.

3. The legitimizing power of law: “Creating a culture of compliance”

The legitimizing power of law refers to the idea that for laws to be truly effective,
they must be seen as legitimate, encouraging voluntary compliance rather
than relying solely on sanctions or enforcement.

Scholars distinguish between three types of legitimacy:

i. Outcome legitimacy: When the results of law align with the people's
expectations.
ii. Relational legitimacy (or substantive legitimacy): When the content of the
law aligns with people’s moral and social norms. In this case, people follow the
law naturally, with sanctions used only for extreme cases of deviance.
iii. Process legitimacy (or procedural legitimacy): When laws are created and
enforced through fair, trustworthy, and transparent processes.

In heterogeneous societies, achieving substantive legitimacy requires laws that

balance diverse worldviews and enable cohesive functioning. For instance, debates
about religious or customary law are deeply political, affecting the legitimacy of state
authority, as seen in countries like Bolivia, Colombia, and Ecuador, where
constitutional recognition of communal and indigenous rights expanded state
legitimacy. Similarly, the inclusion of Islamic law in some states helps define national
identity in regions with significant Muslim populations, such as Libya and Mindanao.

Process legitimacy is crucial for legal systems to be respected. Max Weber's concept
of rational legal authority highlights how compliance depends on people's belief in
the fairness of the legal system. Tyler's research supports this, showing that people
are more likely to obey laws they perceive as fair and procedurally just, beyond fear of
punishment. Studies in Africa confirmed that people’s compliance with laws is tied to
their judgment of the government's legitimacy, based on competence and procedural
justice.

However, transplanting laws from one country to another often fails when not
adapted to local conditions. Countries that adapted foreign laws to their specific socio-
economic contexts, or already had populations familiar with the principles, saw
greater success. For instance, legal transplants during EU integration were more
effective when accompanied by efforts to empower domestic actors through
assistance and monitoring. In contrast, attempts to transplant judicial reforms and
anti-corruption laws in southeastern Europe, which bypassed local legislative
processes, did not yield the desired outcomes.
 Ordering power: The constitutive role of law

The constitutive role of law is foundational in defining the formal governance

structure of a state, primarily through constitutions. These laws grant power to state
actors, outline the roles and responsibilities of different government branches, and set
formal constraints on their authority. Constitutions typically establish checks and
balances, separation of powers, and mechanisms like independent review
bodies or a bill of rights. These formal rules shape the policy-making and
implementation process.

Constitutions serve as the rules for making rules, setting the framework for how
laws are created and enforced. However, the effectiveness of these formal rules
depends on whether they truly limit power or serve as mere "parchment barriers"—
that is, symbolic without real enforcement. Informal and practical power dynamics
also influence how these formal rules shape governance. This section explores the
conditions under which these rules genuinely define power distribution and influence
governance dynamics.

1. Constitutions: “Rules about making rules”

Constitutions, serving as the rules for making rules, have been proliferating,
especially with the rise of new independent states and political transitions in regions
like Central and Eastern Europe post-Soviet era. Despite this growth, constitutions are
typically short-lived, with an average lifespan of 19 years globally, and only 8 years
in Latin America and Eastern Europe. Constitutions are crucial political tools, but their
effectiveness in limiting power through formal rules varies.

There are two key types of governance failures related to constitutions:

1. Failure of the constitutional bargain: Short-lived constitutions reflect the
breakdown of agreements, which can sometimes lead to more stable bargains
but often result in conflict that undermines investment and pro-poor
policies.
2. Divergence between constitutional limits and practice: This occurs when
constitutional rules are ignored or bypassed through elite deal-making,
leading to weaker development outcomes. In such cases, failure to enforce
rights—such as property, civil, political, and economic rights—harms both
growth and equity. However, divergence from formal rules may also be used to
preserve elite bargains.

Empirical evidence on the impact of constitutional endurance is mixed, though

longer-lasting constitutions are associated with positive social and political outcomes
like democracy, rights protection, and stability. As constitutions age, they tend
to foster greater credible commitments and coordination. However,
understanding why rules are sometimes followed or ignored is key to addressing the
gap between constitutional principles and practice.

2. Constitutions as a commitment and coordination device

The excerpt discusses the role of constitutions as tools for commitment and
coordination among rulers and interest groups. Unlike regular laws,
constitutions need to be self-enforcing, as there is often no clear guardian of the
rules. Effective constitutions function as bargains that allocate power, maintaining
stability as long as interest groups find them beneficial. They help reduce
renegotiation costs and conflicts by clearly defining institutional roles, and
entrenchment makes these rules "sticky," limiting the ability of groups to exit the
agreement when dissatisfied.

Enduring constitutions typically share characteristics such as inclusiveness,

flexibility, and specificity, which foster resilience and reduce future
disagreements. Additionally, even if politicians may not genuinely intend to follow
constitutional provisions, the mere existence of these rules can facilitate collective
action among citizens, particularly during elite conflicts. For example, in Tunisia,
opposition groups utilized constitutional language and international human rights
treaties to structure a new government despite previous regimes treating them as
mere rhetoric. Thus, constitutions can act as mechanisms for both horizontal and
vertical accountability, empowering citizens to mobilize for their rights.

3. Explaining divergence between law and practice

The passage explores the divergence between legal frameworks and actual political
practices, particularly in how institutional designs affect elite interests. While
political institutions like presidential versus parliamentary systems create
different incentives, outcomes depend on whether political actors actively
engage with these formal rules.
In many countries, both developing and developed, power is often exercised through
"alternative political technologies" or "informal institutions," which operate
outside the formal legal system. These may include clientelism, bribery, and
traditional authority structures. Such informal mechanisms often arise not merely
from deviance but as practical solutions to commitment and collective action
problems, aligning elite incentives with the real distribution of power.

Thus, the gap between law and practice often reflects a replacement of formal rules
with more contextually suitable arrangements that help maintain stability through
elite bargains. The conditions under which these informal agreements evolve into
formal, rule-based governance are discussed in further detail in a subsequent chapter.

Ordering contestation: The role of law in change

The passage discusses the dual role of law in shaping both elite behavior and
citizen contestation of power. While elites use law to implement policies and
exercise authority, citizens can leverage law to challenge these exercises of power.
Law is seen as both a product of social and power dynamics and a tool for reshaping
them.

In well-functioning legal systems, institutions such as courts and regulatory bodies

facilitate accountability by providing mechanisms for citizens to challenge powerful
authorities. However, the accessibility and effectiveness of these institutions can vary
widely depending on historical and political contexts.
Despite challenges to legal effectiveness in many countries, there is a global trend
toward "juridification"—an increase in legal frameworks and practices. This includes
the rise of new constitutions in the Global South, empowered judiciaries, and the
integration of legal concepts into social movements. Law increasingly serves as a
common language and a battleground for diverse groups, including citizens, states,
and corporations, highlighting its role in promoting accountability and fostering more
equitable negotiations.

1. Law and social rights

The passage highlights the growing significance of law in advancing social and
economic rights, particularly in developing countries. Many of these countries
have incorporated such rights into their constitutions, leading to increased citizen
engagement in policy arenas. This trend is especially evident in Latin America,
where courts have evolved from weak institutions to influential players in
political and developmental matters, supported by both political fragmentation and
citizen demand.

In India, the Supreme Court has been instrumental in public interest litigation,
promoting the rights of disadvantaged groups and enhancing government
accountability on issues like child labor and public health. Similarly, South African
courts have held the government accountable for housing and healthcare.

The effectiveness of legal action in promoting social justice does not always rely on
favorable judgments; even losses can mobilize activists and foster rights
consciousness. The concept of “vernacularization” emphasizes the importance of
grounding rights discourse in local contexts, and successful mobilization often requires
building strategic coalitions alongside legal awareness.

Law also functions as a tool for accountability outside formal institutions. In

China, citizens utilize legal frameworks to challenge local officials and corruption in a
phenomenon known as "rightful resistance." This approach often operates outside
courts, focusing on community mobilization and exploiting divisions within the
state. Similar strategies are evident in Kenya, Mexico, and Bangladesh, where legal
discourse is used to structure claims for housing, land rights, and fair labor conditions.
In these contexts, law serves as a framework for dialogue and coordination in
accountability efforts.

2. Legal institutions and credible commitment

The passage discusses how countries with weak legal institutions have sought
international support to enhance their capacity for credible commitment,
particularly in combating corruption. An example is Guatemala, which enlisted
the United Nations to establish the International Commission against Impunity in
Guatemala (CICIG), successfully prosecuting numerous officials, including a sitting
president.

Other countries, such as Bosnia and Herzegovina and Cambodia, have also
employed international judges and prosecutors to address sensitive cases. While
these initiatives have led to successful prosecutions, they face criticism for lacking
sustainability as they often circumvent domestic political processes.
In instances where local courts are viewed as inadequate, citizens have pursued
legal action in foreign jurisdictions, leveraging the concept of universal jurisdiction for
severe crimes. For instance, affected communities in Papua New Guinea sought
redress in Australia against a mining company for environmental damage. Although
the case was not fully successful, it prompted changes in local negotiations, ensuring
community representatives were included in discussions about development
agreements with the company and the government.

3. Transnational legal pluralism and contestability

The passage discusses the concept of transnational legal pluralism,
highlighting the emergence of "global governance" characterized by a mix
of binding and non-binding legal instruments that influence governance
beyond national borders. This framework includes treaties, conventions, and
voluntary standards across various domains such as business, labor, human
rights, and environmental sustainability.

These transnational governance regimes result from contests among state,

private, and civic actors, shaped by power dynamics and interests. This legal
pluralism offers domestic actors opportunities to challenge existing power
structures. For instance, factory workers in Mexico and Guatemala leveraged
international labor standards and company codes to improve working conditions and
unionize, aided by transnational advocacy networks that pressured local governments.

Similarly, Cambodian garment workers utilized international labor standards to

secure favorable trade conditions from their government. Indigenous groups played a
crucial role in establishing international norms for the extractive industries, notably
the principle of free, prior, and informed consent. These examples illustrate how legal
standards can create institutional arrangements that enhance contestability in
bargaining arenas, such as collective bargaining mechanisms and requirements
for consultations between companies and local communities.

Getting to the rule of law

The passage discusses the concept of the rule of law, highlighting its essential role in
achieving stable and equitable development. While the rule of law is widely endorsed
as a governance ideal, its precise meaning varies. At a minimum, it entails that both
government officials and citizens are bound by the law, which must be clear, certain,
public, and applied equally through effective legal institutions.

The discussion has shifted from "thin" versions of the rule of law, which focus mainly
on procedures, to "thicker" versions that emphasize substantive adherence to
rights, fairness, and equity. The United Nations defines the rule of law as a
governance principle where all entities, including the state, are accountable to laws
that are publicly promulgated, enforced equally, and aligned with international human
rights norms.

There is a strong correlation between indicators of the rule of law and income levels,
although the causality and underlying mechanisms are less understood. Recognizing
the micro-foundations of laws’ effectiveness can assist policymakers and citizens
in crafting strategies that promote successful legal frameworks. Ultimately, societies
shape their transitions to the rule of law through the dynamic interplay of power
and contestation, focusing not just on the rule of law itself but also on how law is used
by groups and individuals to promote and enforce their interests.

Box 3.4) Transitions to the rule of law

The passage discusses transitions to the rule of law, noting that while there is
extensive literature on democratization, less focus has been placed on legal
transitions.
Three key types of transitions are identified:

i. From Customary to Modern Law: This shift often occurs when actors believe
that a unified legal system will better serve their economic interests,
particularly in facilitating trade and investment. However, transition costs are
high, and existing stakeholders may prefer customary rules, making political
power crucial for implementing change.

ii. Acceptance of Legal Constraints by Elites: Initially, formal law is applied

primarily to nonelites (termed "rule by law"). A transition to "rule of law"
happens when elites accept legal limitations on their power. North, Wallis, and
Weingast (2009) suggest that constitutional constraints become self-
reinforcing when power is evenly distributed and elites recognize long-term
benefits. However, the challenge remains as to why elites continue to respect
these constraints when power dynamics shift.

iii. Adaptation of Foreign Legal Systems: Successful adaptation of foreign legal

systems depends significantly on indigenous elites tailoring them to local
traditions. Examples include Japan and other Asian countries that adopted
Western systems, while places like India demonstrate a higher degree of legal
pluralism than their colonial influences.

The passage emphasizes the need for more research into legal transitions, indicating
that a fully modern legal system is not a prerequisite for economic growth. Legal
systems often evolve alongside economies, and the transition from customary to
formal law may occur later than Western observers expect. A deeper understanding of
these historical dynamics is necessary to guide developing countries in implementing
the rule of law effectively.