It is easier to explain an innovation after it occurs than before it occurs. With economic innovation as with progress in science, mystery drapes the future. A theme of this book is that the analysis of law can dispel part of the mystery of growth. Economic innovation usually requires combining new ideas and capital. They naturally resist each other. We will explain this resistance in terms of the Òdouble trust dilemmaÓ Ð the problem of inducing the innovator to trust the investor with his ideas, and also inducing the investor to trust the innovator with her money. The solution to this problem depends on law, especially the law of property, contracts, corporations, finance, and bankruptcy. Law and growth economics will dispel part of the mystery of growth by explaining lawÕs contribution to solving the double trust dilemma.
This book is regularly updated and is a work in progress. Please check the online edition at the Berkeley Law Scholarship Repository for the latest available version.