[eru]

The book `Just get out of the way' (http://www.independent.org/publications/tir/article.asp?a=51...) addresses this topic. One point the author makes is that honest and competent government officials are one of the most scarce and valuable resources for a developing country, and thus institutions and laws should be designed to lighten their workload.

One example are insolvency laws.

In most countries, there are three options: creditors and debtors reach an agreement. Liquidation. And Administration (https://en.wikipedia.org/wiki/Administration_(law)) ordered by court.

Administration is complicated, and requires complicated laws and competent and honest officials to administer the laws. So countries, especially poor ones, should not offer this alternative.

If the company is worth more alive than dead, creditors and debtors will come to an agreement. (Especially if you remove the alternative of administration, that gives the debtor an out, rendering the creditors threats toothless.)

[specialist]

Good link, thanks.

Hernando de Soto makes a similar case that societies need some cultural achievements unlocked before their market-based economies can work well. Stuff like property rights, fair and impartial courts, contract law, enforced regulatory authority, professional civil servants, etc.

The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else

Hernando de Soto (Author)

http://www.amazon.com/The-Mystery-Capital-Capitalism-Everywh...

I have friends that work in development who criticize de Soto: a good start, but as one would expect, the story isn't that simple. Alas, I don't recall their upgrades to de Soto's insights.

[eru]

Exactly.

The thesis of the book I mentioned is exactly that you should very carefully economize on the amount of `cultural capital' required to run your economy. A mostly market-based economy is one way to do that, if regulation is chosen carefully.

Societies that have lots of cultural capital, like the Nordic countries, can get away with more socialism without everything becoming corrupt. (It might still be inefficient for them to go that route, but at least they can bear the costs.)