The Rule of Law

According to the World Bank, the rule of law "measures the extent to which agents have confidence in and abide by the rules of society. It encompasses the respect of citizens and the state for the institutions which govern their interactions." Academic Director of the Institute for Competitive Governance, Tom W. Bell, compares the rule of law to the health of the government. If the health of the government is good then the government functions well, meaning its laws, property and human rights are respected, contracts are enforced, and if the government is sick, corruption, crime and chaos rise.

You might be shocked by the discovery the World Bank made in 2006 when they decided to catalog and measure every kind of human wealth. What they have found might have shocked the World Bank itself as it barely notices "the elephant in the room" and hides the most valuable thing in the world in parentheticals, plain in the data of their own report. But thanks to Tom W. Bell and his book "Your Next Government? From the Nation State to Stateless Nations" this data has been decoded for us, the common people who usually don't read the bank's reports.

Look at the image below to see the pie chart created from data scattered throughout the World Bank's report and also published in Tom Bell's book mentioned above.

Contrary to common belief that the wealth of the country depends on its fertile fields, rich mines, or oil reserves, natural resources have very little economic value. Even what people produce amounts to only 18% of their wealth. But even schooling, the next single largest source of wealth, is nothing in comparison with the leading role of the Rule of Law. The Rule of Law has the largest economic value for the world.

We will not focus here on how the World Bank collected and measured their data for this research. You can learn more about it from Tom Bell's masterpiece that you can buy here.

However, there is one more interesting finding from his book that is worth mentioning here and it deserves a direct quote:

"Researchers have discovered that small improvements in government services, of which the rule of law figures paramount, have large impacts on human well-being. The World Bank found that a 1-point increase in a country's "rule of law" score in its 100-point index boosted per capita wealth by more than $100 in low-income countries, more than $400 in middle-income ones, and nearly $3,000 in high-income countries."

Moreover, other research mentioned in the book indicates that improving the quality of a jurisdiction's governing services by a standard deviation "means not just treble the money in people's pockets; it means less than half the infant mortality. It means better education, too; a standard deviation's worth of government improvement nets a 15-25 percent increase in literacy."

As you can see, the rule of law not only affects wealth but, most importantly, affects human well-being.