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I explore how political property rights to revenues from governance relate to generality norms in governance. I do so by examining the rise of Western constitutional liberalism from the perspective of property rights economics and political economy. While it is true that Western political development has been the result of bargains between political elites (Congleton 2011), the implications of the fact that parties to these bargains historically were “owners of the realm” have been underappreciated. I argue the unintended consequence of these political bargains among “owners of the realm” was a de facto supermajority rule, approaching conceptual unanimity for those party to the bargains. In developing this argument I elaborate on the relationship between political and economic property rights, noting that while they were and will continue to be intertwined, there was a hierarchy of rights that became inverted over the course of elites’ constitutional bargains.

Objective. It is widely accepted that good institutions caused modern economic prosperity. But what caused good institutions? In this article we challenge recent explanations that favor state capacity, pointing instead to the polycentric governance structures of medieval Europe. Methods. We develop a novel theory of constitutions, which we call "polycentric sovereignty," based on political property rights. We use this theory to reinterpret the historical evidence concerning the relationship between the medieval patrimony and good governance. Results. Our analysis suggests the de facto balance of power among the "owners of the realm" in medieval Europe are crucial in explaining the rise of pro-growth institutions, especially those that respect and uphold the rule of law. Conclusion. Medieval institutions set the background conditions for good governance. We cannot understand the bounty of economic modernity without reference to the received political-economic traditions from medieval Europe. disputes the "institutions as the proximate cause of enrichment" thesis. She contends a change in social rhetoric and the prestige attached to the "bourgeois virtues" caused the Great Enrichment. We do not think her arguments preclude an institutional explanation, however. See Young (2017) and Boettke and Candela (2017) for how McCloskey's arguments are, in fact, complementary to institutional explanations of the wealth of nations.

The problem of financial stability is political and institutional, rather than narrowly economic. To achieve a more resilient financial system, we need to pay attention to the incentives of actors who have the power to act discretionarily, and to the knowledge limitations of such actors in the face of substantial complexity and uncertainty. The literature on polycentric governance and institutional resilience provides key insights that the literature on financial stability has thus far neglected. We offer an analysis based on the “design principles” for robust governance institutions proposed by Nobel laureate Elinor Ostrom. We apply these principles to banking systems and explore under what conditions a banking system can be expected to discover rules that align private incentives with broader financial stability, and generate the necessary knowledge to govern such a complex system. This perspective challenges both “microprudential” and “macroprudential” approaches, which assume a monocentric financial and banking regulator.

Former Federal Reserve Chairman Ben Bernanke has claimed that the Fed's bank bailouts during the 2008 financial crisis were consistent with Walter Bagehot's rules for a lender of last resort. This paper demonstrates Bernanke's claims to be mistaken. First, we outline Bagehot's doctrine for a classical lender of last resort. Next, we discuss Bernanke's theory of bank bailouts and his statements regarding the Fed's role in the 2008 bank bailouts. Finally, we examine the bailouts and demonstrate that, contrary to Bernanke's claims, the Fed's actions were not consistent with Bagehot's rules for a lender of last resort.