• What are the ways in which “legal origins” are believed to matter?

One hypothesis (the ‘adaptability’ claim) concerns the way in which new rules are produced. Civilian systems are characterised by wide-ranging codification of legal rules, whereas common law systems are distinguished by their reliance on incremental change through the accumulation of judicial precedent. It may be that this ability to shape the law on a case-by-case basis helps to render legal regulation more adaptable. A second hypothesis (the ‘political’ claim) posits that judges in common law systems have greater power (as lawmakers) and independence from the other branches of government, and consequently may be expected to do a better job in protecting private property rights from encroachment by the state.

• Is the “adaptability claim” true in India?

If it were an accurate account, we would expect to see rapid development of judicial rules following significant environmental or technological changes. Post-liberalisation India therefore makes a good test case.

The defining feature of the Indian court system is the staggering delay involved in resolving a case by trial. With a typical delay of 10 years or more until a lawsuit is resolved, it seems hardly likely that judicial innovation in lawmaking can have been the main channel through which India’s substantive laws regarding investor protection were developed in the post-liberalisation era.

• What actually worked instead?

These findings challenge the notion that common law systems’ alleged advantages in terms of adaptability give them an inherent advantage for economic development. Where courts are chronically overworked—as is likely to be the case in many developing countries—then it is hard to see that they can be motors of legal reform. In contrast, the most successful mechanism for producing new laws in India has been delegation to regulators with quasi-legislative power. The real engines for development of the legal framework of corporate finance in India have rather been specialist regulatory bodies such as SEBI, and, to a lesser extent, the RBI.

... contd.