Gregory Clark, University of California - Davis

Do institutions matter for economic efficiency and growth? Economists typically attribute supreme importance to institutions and the incentives they create in explaining economic performance. The English common fields have been cited as a classic case of institutional failure. When these common fields were enclosed it seemingly created huge profits for landowners, implying that common fields squandered about 15% of potential agricultural income for more than a millennium. This paper argues that the alleged profits from enclosure were merely the self-deluding dreams of wild-eyed eighteenth century agrarian reformers, which passed into the realm of "fact" as a result of the poor research habits of modern historians and economists (including the author). The commons in fact were an efficient institution in pre-industrial England. Village communities established ways of regulating common rights that preserved most of the value of these rights. Where common rights were unregulated it was because the land was inherently less fertile, and this may have made regulation too costly. When changing prices made private property rights more efficient, people responded quickly to modest profits. The market, including the market for institutional change, worked well. The case of the common fields illustrate a wider principle that applies to English economic history, which is that there is little sign that any of the institutional arrangements of pre-industrial society resulted in much efficiency loss.