Economics of Regulation and the Rule of Law in Korea

Abstract

The market economy has three pillars: voluntary exchange, purposive rules of the game, and the rule of law. According to classical works by Smith, Rousseau, Hayek and Friedman followed by empirical research by various contemporary economists, the common law system is more conducive to the rule of law than civil law. The rule of law is notoriously weak in Korea partly because Korea follows the civil law tradition. The purpose of this paper is to suggest practical measures to enhance the rule of law in Korea as a precondition for speedier economic growth in the future. I rely on logical arguments and previous academic works in showing why the common law system is preferable. The main point is that the common law system is more friendly to rule abiders and subsequently less costly to the people and the government. In a word, common law is more effective and efficient in establishing the rule of law, ceteris paribus.