2. On the design and transfer of institutions

As a starting point of our examination, we propose to reflect on the nature of institutions and the problem of institutional design. In this section, we will also remark on the idea of the transfer or transplantation of institutions, and on some issues that must be taken into account when dealing with this problem. We will return to this issue in greater detail in Section 4, where we will discuss the overall viability of a scheme of this kind.

Institutions represent the system of incentives within which economic and political agents interact. As is well known, these consist of formal and informal rules (North, Reference North1990). Formal rules refer to constitutions or sets of laws that establish the realm of public and private activity, as well as regulate and curb different types of activities and behavior. Informal rules refer to codes of behavior or conventions; in some cases, these may represent extensions or elaborations of formal rules, which points to a significant complementarity between these types of institutions, and this is important to bear in mind in our ensuing discussion (North, Reference North1990; Platteau, Reference Platteau2000).

Informal rules reflect some sort of common understanding or guide to behavior. It is in this sense that they fulfill the characteristics of social norms and conventions. Indeed, it has been argued that as such social norms may represent some of the most important types of rules governing private relations (Ellickson, Reference Ellickson1991). At the same time, it has been claimed that conventions, which can be defined as ‘rules that have never been consciously designed and that it is in everybody's interest to keep’ (Sugden, Reference Sugden1986: 54), have an important likeness to constitutions, or to be more precise, that constitutions can be viewed as conventions (Ordeshook, Reference Ordeshook1992; see also Hardin, Reference Hardin, Grofman and Wittman1989). Here, the analogy is that if agents can coordinate on a given equilibrium in a situation where several alternative equilibria exist, and there is a shared belief that coordination will be effective, coordination will be achieved. The fundamental point here is that constitutions should not really be viewed as contracts, but as coordination devices based on some previous common beliefs about the strategies available to each citizen/player.

In general terms, the institutions-as-coordination-devices perspective ensures that rules will be self-enforcing. Self-enforcing rules are, in a very fundamental way, deeply embedded in the behavior of the agents that accept them. That is why they are actually followed; compliance reflects the underlying appreciation afforded to the rules in place. In this sense, formal rules are respected to the extent that they reflect an underlying behavior that is expected or traditional. This way of viewing rules is related to the argument advanced long ago by Menger (Reference Menger1883/1996), who claimed that social institutions, including the law, language, money and markets are, to a large extent, spontaneously generated and thus self-enforcing. And all of this is reminiscent of the literature on the spontaneous order tradition.Footnote ¹ Spontaneous orders involve an endogenous process but, as the expression also underlines, they point to the achievement of some order; the underlying predictability of these arrangements is what is important to stress upon here.

From this discussion it can be gathered that the codification of informal norms or spontaneous orders can be expected to be a very tricky business. When, for example, money is established as a legal tender, such codification has actually proved to be possible. It is important to emphasize at any rate that independent of what any code or law states, money will be only useful if people want to use it. The equilibrium character of an institution is thus not given by the fact that it is codified. As we shall see below, in other cases it may be much more difficult, if not impossible, to properly articulate and therefore codify the informal rule. The embeddedness of the informal rules is crucial here.

In this sense, the foundation of institutions is of critical importance when we consider the problems of institutional design and institutional change (Kingston and Caballero, Reference Kingston and Caballero2009; see also Runst and Wagner, Reference Runst and Wagner2011). In light of our previous discussion, and following the terminology used by Boettke et al. (Reference Boettke, Coyne and Leeson2008), we can talk about institutional design or emergence as being exogenous or endogenous, with the former case representing a process of codification that is not based on existing norms. On the other hand, the problem of institutional transplantation necessarily involves a constructivist view not least because this process implies some explicit purpose associated to an ultimate goal, which is, after all, what is motivating the transplantation in the first place. Assuming that achieving this ultimate goal is possible, and that the corresponding optimal institutions can be designed, the problem as to how to transfer this institutional system while taking into account the informal norms of the host country must be squarely faced. In this respect, different levels of institutional analysis must be recognized and confronted (Williamson, Reference Williamson2000). Here, we will leave aside an evaluation on the possibility of designing such an optimal system and focus on this later issue: How do we manage the transfer of institutions?

The problem of the transfer of institutions has been considered previously in the literature on institutional economics (and also in the field of comparative law). In the first-mentioned field, it has appeared at the center of the ‘new comparative economics’ (Djankov et al., Reference Djankov, Glaeser, Porta, Lopez-de-Silanes and Shleifer2003). In general terms, as Rodrik (Reference Rodrik2000) has argued, once the importance of institutions for the process of economic development is recognized, the problem turns into understanding which institutions matter and how to get hold of them. Based on his faith on the importance of institutional diversity in this sense, Rodrik (Reference Rodrik2000) argues in favor of taking ‘local knowledge’ into account, which will involve a process of experimentation and learning (through democratic politics). In a similar vein, Evans (Reference Evans2004) has lamented the rise of ‘institutional monocropping’, i.e. the imposition of standardized institutional blueprints, which minimizes the role of local knowledge; thus he has advocated a role for ‘deliberative development’. Local knowledge is also at the center of what Boettke et al. (Reference Boettke, Coyne and Leeson2008) refer to as the differences between indigenously introduced endogenous institutions on the one hand, and indigenously and foreign-introduced exogenous institutions on the other. The authors carefully highlight the importance of grounding endogenous institutions on the ancient Greek concept of mētis, which is viewed as reflecting ‘local knowledge resulting from practical experience’.Footnote ² In this sense, successful institutional change must be based on endogenous institutions.

Roland (Reference Roland2004), on the other hand, has presented a taxonomy of institutions, which he classifies as ‘slow-moving’ and ‘fast-moving’; these involve different consequences for institutional change. The author argues that the interaction between these classes of institutions is fundamental for a complete understanding of this issue. Specifically, the nature of social norms, values, and beliefs as slow-changing institutions highlights the difficulty of the problem of the transfer of institutions.

An influential strand in this literature has been motivated by the disparity of different experiences of institutional transplantation in terms of their results.Footnote ³ For example, Berkowitz et al. (Reference Berkowitz, Pistor and Richard2003) argue that the effectiveness of legal institutions crucially depends on the way in which the institutions were actually acquired. Institutional transplants are not all the same; in some cases, the imported rules have been adapted by the host countries or were previously familiar there, and this has led to important differences in terms of their effectiveness. Following a different approach, Zweynert and Goldschmidt (Reference Zweynert and Goldschmidt2006) examine the experience of institutional transitions in Central and Eastern Europe both before and after World War II (therefore, ‘the two transitions’), attempting to reconcile the influence of path dependence and politically driven institutional reform as drivers of successful changes. In this sense, they argue that history and culture really do matter in terms of institutional change, but that culture is not homogenous, and policy cannot be left out of the picture. In a more recent paper, Zweynert (Reference Zweynert2009) has further elaborated on the rule of culture in this area, arguing that it should be viewed as a ‘toolkit’ that can be used strategically when dealing with the problem of institutional change; thus, the problem of institutional change cannot be reduced to a single cause.

In their formal studies on these issues, Mukand and Rodrik (Reference Mukand and Rodrik2005) and Grajzl and Dimitrova-Grajzl (Reference Grajzl and Dimitrova-Grajzl2009) present positive and normative analyses on the implications of transplantation and homegrown approaches to institutional change. These models differ in that when Mukand and Rodrik (Reference Mukand and Rodrik2005) endogenize decision-making, they are specifically interested in the problem of institutional reform, while Grajzl and Dimitrova-Grajzl (Reference Grajzl and Dimitrova-Grajzl2009) present a sequential model of the lawmaking process.Footnote ⁴ Given considerations about initial promulgation costs and subsequent adjustment costs, and that the political context of the reform process is significant, the latter authors find that the heterogeneity of interests and legal adaptability matter greatly for the success of different types of institutional designs. In the end, the results presented by Grajzl and Dimitrova-Grajzl (Reference Grajzl and Dimitrova-Grajzl2009) are consistent with the findings of Berkowitz et al. (Reference Berkowitz, Pistor and Richard2003), as they suggest that transplantation can be efficient when ambiguity about the effects of law is small and the adaptability of the legal system is high.

This brief review thus points to several commonalities in the literature; for one, a general recognition emerges in the sense that the transplantation of institutions is much more complex than what naïve reformers may have thought at different points in time throughout history. At the same time, one observes that the interplay between formal and informal institutions appears to be at the center of the problem at hand; therein the importance of taking ‘local knowledge’ into account. This point is not completely followed through, however. We are ready to argue that doing so offers important insights into the process under examination.

From our previous discussion, it follows that to the extent that informal rules complement or extend formal rules, radical and unanticipated changes in formal rules can be expected to lead to an institutional disequilibrium. That is why we so often observe that many processes of institutional transplantation fail: The simple and straightforward implementation of foreign constitutional models, which may of course be very stable and successful in their native environments, may not have the expected consequences in the country where these codes are being transplanted to as the existing institutional equilibria will be disturbed. This suggests that delving into what determines the fit between formal and informal institutions, and how this merging comes about, is an important question, one that may clarify the feasibility of an exercise of the type we are examining here. This leads us to an examination of the development of informal rules as coordination devices (and to the problem of how they may be made consistent with the transplanted formal rules).

One way to view this issue is in an evolutionary fashion such that one can argue that the way in which a given rule is selected involves some experimentation and, finally, settling on one rule even when several equilibria are possible (Young, Reference Young1996). How this type of coordination comes about is almost an open question, although sometimes a different (external) type of common knowledge may ensure a specific type of coordination (Chwe, Reference Chwe2003). This is an interesting way to view this problem, which may be important when examining accommodation between informal norms and formal rules. But we want to offer a somewhat different and complementary perspective on this problem.

Culture, habits, norms, and mētis, the informal rules that are most relevant to the transplantation of institutions, seem to be tacit in nature; in this sense, they represent a form of tacit knowledge. The precise definition of this term is important here. In his famous ‘The Use of Knowledge in Society’, Hayek (Reference Hayek1945) originally referred to ‘local’ knowledge, which he classified as knowledge that was specific to time and place. It was in later writings that Hayek (Reference Hayek1967: 60) explicitly used the concept of tacit knowledge, which he defined as a type of knowledge we cannot really articulate; thus, and in his own words, ‘we are not in fact able to specify all the rules which govern our perceptions and actions’. As is well known, tacit knowledge is a concept that has been extensively discussed by Polanyi (Reference Polanyi1958, Reference Polanyi1966/1983). Polanyi, a chemist, came to be interested in these issues through his own scientific practice; therein his later interest in the philosophy of science. According to Polanyi, tacitness refers to knowledge an agent has, and knows he has, but which he cannot verbalize. The idea is that rules ‘not known as such’ (Polanyi, Reference Polanyi1958: 50) are still rules. In this sense, these definitions point, exactly, to the fact that tacit rules are acutely relevant in terms of their functions and yet they are not communicable.

Viewing the core of informal rules as tacit in this fashion seems accurate, although we should stipulate that here we are especially referring to a subset of informal rules, such as values, manners, and in general different types of social norms. At any rate, this seemingly non-controversial observation has significant implications for the problem of institutional design. We are ready to argue that these consequences have not been adequately appreciated. As we shall see below, in the context of his work as legislator and reformer, the English philosopher Jeremy Bentham believed that it was possible to work within the constraints of local knowledge and still provide efficient institutions to different nations. This would suggest that the transfer of institutions would be theoretically and practically possible (without assuming an initial correspondence of values between the source and host countries) when correctly undertaken by an adequately motivated legislator. All that would be required would be knowledge about the relevant informal rules, which would then be considered in the design of formal rules (and where achieving consistency between these different types of rules would be an important object). However, this notion turns out to be quite problematic. But let us not get ahead of our argument and firstly review the proposals advanced by Bentham.

3. Jeremy Bentham on the theory (and practice) of the design and transfer of institutions

In this article, we will assume that Bentham's interest in codification is well known; consequently, this is an issue we will not examine in much detail here.Footnote ⁵ We should stress, in any case, that his interest in this area was not only theoretical but also political. After all, Bentham's advocacy for codification was directly related to his desire to further the ‘greatest happiness of the greatest number’ through practical institutional reforms. In this sense, his work on how the law ought to be was the central motivation of his long and productive life. Bentham's general interest in codification was based on his aversion for the common law system and his strong desire to see it replaced by a rational codified system. Specifically, it was his acceptance of the utilitarian principle as well as his emphasis on the use of reason as a foundation of a legal system that were at the basis of his rejection of the English common law. Bentham was particularly critical of the fact that since the common law system was unwritten, it was uncertain, and thus would lead to a disappointment of the expectations of agents, resulting in insecurity and corruption. This, in turn, implied that the societal utility was not being maximized in any relevant sense.Footnote ⁶ But before we continue, it is important to explain that for Bentham codification not only refers to the well-known division between civil versus common law but to the notion of having a general codification of the law of the land. In this sense, a codified system would have the great advantage that it could be purposely constructed so as to be coherent and complete, while at the same time serving the greatest happiness principle. Bentham expressed these points very forcefully in his different ‘codification proposals’, his explicit proposals to work out a complete system of laws that would be applicable in ‘all nations professing liberal opinions’ (Bentham, Reference Bentham, Schofield and Harris1998).Footnote ⁷

Bentham's work on the transfer of institutions has been viewed as an advocacy for the transfer of a one-size-fits-all system of laws.Footnote ⁸ However, his proposals can be more accurately viewed as promoting the transfer of a set of principles for codification. John Stuart Mill (Reference Mill and Robson1969), who while having an ambiguous relation with the Benthamite system had a clear knowledge of his work, explicitly defended him against the claim that he advanced a ‘one uniform suit of ready-made laws for all times and all states of society’, and further argued that

In this sense, we can argue the fact that Bentham may have viewed the Pannomion, or whole body of laws, as being suited of being adopted everywhere does not imply that it was an exact facsimile of this code of laws that was to be applied everywhere. At any rate, as we present Bentham's ideas regarding the feasibility of the transfer of institutions, we will be able to discuss their significance and potential relevance.Footnote ¹⁰

Bentham's model of human behavior and his model of institutional design are based on two basic principles. On the one hand, people are supposed to act so as to maximize their interests, in terms of seeking pleasures and avoiding pain. On the other, the stated aim of legislation is to maximize the greatest happiness of the greatest number. In this sense, we can say that his was a purely motivational theory of institution building. This attitude can be unambiguously perceived from the opening paragraphs of An Introduction to the Principles of Morals and Legislation, where he states: ‘Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as to determine what we shall do’ (Bentham, 1996: 11). Consequently, ‘The business of government is to promote the happiness of the society, by punishing and rewarding’ (Bentham, 1996: 74). To be sure, an intermediate step is necessary here in terms of combining duty and interest such that people not only follow their interests but also act as they ought to behave so as to effectively promote the greatest happiness of the greatest number (Harrison, Reference Harrison1983). This problem of defining who will perform this junction, and how we should guarantee that he does so, is a no easy task. Bentham's solution in this respect is that the ‘greatest number’ should be the legislator; therein his advocacy in favor of representative government, the extension of the suffrage, periodic elections, and his care in defining the administrative state.

Whatever one may think about the problem of bringing about such a system in the first place, an important limitation of this approach lies in its behavioral structure. Naturally, we cannot expect to examine all the details of Bentham's view of the psychology of man in one paragraph or less. But from an examination of his An Introduction to the Principles of Morals and Legislation (Bentham, 1996), and A Table of the Springs of Action (Bentham, Reference Bentham and Goldworth1983a: 3–115), it does seem that something is missing from Bentham's model. This does not refer to the fact that ‘self-regard’ narrowly understood is an incomplete guide to human behavior because Bentham was very careful in terms of his treatment of this expression. Instead, the missing ingredient seems to be the ideology and beliefs that people hold and which surely also act as a spring of action. The incomplete standing of Bentham's model of man has been articulately stated by Mill in his famous essay on Bentham dated from Reference Bentham and Bowring1838 as he plainly spells out the following:

Motivational homogeneity is thus the building block of all of Bentham's theoretical and practical constructions. Within this context, will it be the case that a specific institutional arrangement that is appropriate for a particular place will be appropriate everywhere or at every time? In other words, to the extent that it is possible to devise an efficient system of laws in a utilitarian sense, can we suppose that it will be feasible to further the diffusion of greater happiness through the transfer of this code? This is a point that Bentham addressed in an essay entitled ‘Of the Influence of Time and Place in Matters of Legislation’ (Bentham, Reference Bentham and Bowring1962), originally published in the Traités de legislation civile et pénale edited in 1802 by Étienne Dumont. According to Bahmueller (Reference Bahmueller1981: 220, footnote 18), this piece was incorrectly titled and edited in Bowring's volumes; thus, a new edition of this text has recently appeared under the title ‘Place and Time’, which, based on manuscripts located in the Bentham papers, ‘more faithfully represents Bentham's own intentions in relation to the structure and detailed presentation of this work’ (Bentham, Reference Bentham and Engelmann2011: 152).

Here Bentham starts from the same model of human nature that we have referred to above, whereby the happiness of society is to be promoted by punishments and rewards, and then asks whether it is necessary to alter a given set of optimal institutions when transferring them to another country. In order to consider this issue Bentham claims that two sets of tables are required. These should present the ‘particulars relative to the body of laws’ (regarding what is expected in matters of the law), and the ‘circumstances influencing sensibility’ in each country, that is,

As Bentham considers how this information is to be used, it can be gathered that place and time do have an influence on matters of legislation.Footnote ¹¹ In this sense, he argues that regard must be paid to ‘subsisting institutions’, although in order to judge them they must first be examined (Bentham, Reference Bentham and Bowring1962: 179; Reference Bentham and Engelmann2011: 171). Whether these institutions should then persist is a somewhat different matter; the fact that a particular institutional system had been preferred, on historical grounds, is not really a recommendation for its use now as this is an issue that must be considered in its own merit. However, considering this reality is important in terms of the viability of any reform process (Bentham, Reference Bentham and Bowring1962: 181–182; Reference Bentham and Engelmann2011: 173–174). In the end (and in a paragraph that only appears in the new edition of this work, which is somewhat problematic since Bentham's plans as a reformer were known through the work that was actually published), Bentham explains that

The division between these classes of laws is no easy or direct matter. Indeed, this seems to represent an important constraint on Bentham's approach to codification viewed narrowly. This said, the behavioral foundations of his model ensure universality with respect to the principles of the law, and Bentham (Reference Bentham and Engelmann2011: 208) explicitly argues that his work in this sense is to be considered the appropriate common ground.Footnote ¹²

From this discussion it should thus be clear that for Bentham the essence of the codification enterprise, relating to the legislative structure, so to speak, is unique both temporally and geographically. At the same time, in a separate stage it is possible to give each country the best institutional design once we possess all the necessary data, which while particular to every society, one could definitely collect.

In his formal ‘Codification Proposal’ (Bentham, Reference Bentham, Schofield and Harris1998: 241–384), his offer for the adoption of his codification designs to ‘all nations professing liberal opinions’, we are presented with further evidence along these lines. As suggested above, this work is a quasi-catechism of how to approach the task of designing a complete form of laws that would be conducive to the greatest happiness of the greatest number. Short of the content of the laws itself, a wide-ranging list of requirements that would govern the codification enterprise are set forth herein, with a special emphasis on the comprehensiveness and overall consistency of the body of laws (see, for example, Bentham, Reference Bentham, Schofield and Harris1998: section 1). But Bentham is also fully aware that the task of codification must recognize that there are some issues where locals must fill in the details of the law. When arguing that foreigners should be preferred as codifiers (1998: section 9), he claims that natives are influenced by local interests, and even though they have better knowledge of time and place, ‘[t]he deficiency is not so great as it will be apt to appear’, because ‘[i]n comparison of the universally-applying, the extent of the exclusively applying circumstances will be found very inconsiderable’ (1998: 291). In other words, there are parts of this code of laws that are applicable everywhere; the ‘universally-applying’ circumstances are valid in every place. On the other hand, the matters of detail, the ‘exclusively-applying’ circumstances could easily be filled by the legislators in each country.

Our discussion thus suggests that Bentham's drawn up codes, such as the Constitutional Code, should be viewed as an exercise in normative political theory.Footnote ¹³ To be sure, this is a treatise that is worked out at a much greater degree of detail than is common among political theorists. But this is how Bentham was. As Peardon (Reference Peardon and Parekh1951/1993: 622) has argued: ‘Bentham could never be content with mere analysis. Once he had been brought to concern himself with political questions, it was inevitable that his incurably constructive mind should busy itself with devising the institutions of a well-governed state’. From all of this it follows that Bentham's preparatory work for the code (Bentham, Reference Bentham and Schofield1989) should also be interpreted, essentially, as a work in political theory, even though it may have been based on his interest in practical reform (see also Schofield, Reference Schofield1991–1992; Hume, Reference Hume1981).

So far we have examined the structure of the codification designs proposed by Bentham in his work as an expert. Since he was a creative and meticulous thinker, we believe his work should be taken seriously; indeed, many of his ideas have proved to be important contributions in political, social, and administrative theory. Bentham's two-stage model of institution building, distinguishing the universal principles of codification from the particulars of lawmaking, offers much space for reflection on the viability and success of the transfer of institutions. An examination of this issue involves, to be sure, shifting from a normative analysis to the field of practical reform. But Bentham himself was willing to make this move.

4. The viability of the transfer of institutions

Bentham had a deep-seated faith in the possibilities of institutional design and was convinced that the transplantation of institutions was viable. Here, we wish to examine the actual feasibility of achieving the greatest happiness of the greatest number through the transfer of institutions. While our interest lies in this problem in general terms, Bentham's proposals represent a specific case study through which to view this issue. In any case, before we continue we should explain that we are fully aware that there are important motivational issues at play in this exercise. Taking into account the incentives faced by an expert in terms of actually designing an efficient institutional design represents a fundamental problem one should address. However, this is an issue we are not considering here, although it has been partially addressed elsewhere (Couyoumdjian, Reference Couyoumdjian2008).

As mentioned above, the problem of the transfer of institutions must consider the fact that institutions consist of both formal and informal rules. When examining the nature of these rules we argued that the core of informal institutions is tacit. It is in a similar spirit that the law has been referred to as a ‘cognitive institution’ (Berkowitz et al., Reference Berkowitz, Pistor and Richard2003), and that the roles of culture and cognition have been emphasized when discussing the problem of institutional design (Denzau and North, Reference Denzau and North1994; North, Reference North2005). This is a point that should be kept in mind when analyzing the problem of the harmonization of social norms and informal rules with formal institutions. Existing institutional patterns, whether formal or informal, represent an equilibrium, which may be altered through a process of codification or institutional transplantation. The critical problem associated with the transfer of institutions is that tacit knowledge is categorically different from communicable knowledge. The fact that we are not aware of what we know and how we know is an important constraint. The difficulty of verbalizing or communicating tacit knowledge generates the problem that this type of knowledge is not easily shared. Capturing or describing what we know only tacitly thus presents insurmountable difficulties. There is something out there that we cannot adequately deal with or grasp, and yet we need to do so.

As we saw, according to Bentham the principles of law, i.e. what ought to be done, represent universal matters; thus, they can and should be transferred everywhere. As Bentham underscored the importance of including the rationale of constitutions in the structure of his set of laws (Bentham, 1983b, Reference Bentham, Schofield and Harris1998),Footnote ¹⁴ one can imagine that a successful transfer of the principles underlying code-making could in fact be achieved. This type of justification for the arrangements of the code would be common knowledge, and coordination on the proposed standards could be realized on the basis of this focal point of sorts (Chwe, Reference Chwe2003; Schelling, Reference Schelling1960). More generally, we are ready to argue that institutional transplantation requires some coordination device and a mechanism that makes such coordination easier may be useful, and even important, in this respect.

A general plan on the principles of law is, however, different from the specific provisions of the drafted codes. Both formal rules as well as informal norms are fundamental inputs and components in the process of writing down and systematizing codes. The first point is trivial; this is what ‘codification’ is all about. Regarding the second point, Bentham specifically acknowledged the importance of manners and customs in his piece on ‘Place and Time’ here a legislator could presumably rely on the data presented in the different tables he had at his disposal and thus proceed with the task of codification. It is thus that the design and transfer of institutions could be successfully realized.

But awareness as to the importance of knowledge of time and place for codification does not mean that getting a hold of this type of information is actually possible. We are thus ready to argue that an acknowledgment of the role of local knowledge when adjusting the transferred institutions to their new soil (at this stage of the codification enterprise) may not be really useful or practicable given the tacit nature of this knowledge. A la Hayek (1945) we are claiming that assuming the possession of all the pertinent ‘data’, which Bentham (Reference Bentham and Bowring1962; 2011) argues is required for this exercise, simply ignores the very nature of the problem of human or social cooperation. This problem involves much learning. The practice of human cooperation is embedded in tradition, in the existing set of rules, which reflect the history of a given community. This is what we mean when talking about informal institutions. When talking about the transfer of institutions in this context, the very nature of this knowledge, which includes more than just climate, bodily constitution, legal customs, and religion, makes the notion of taking this data as readily available or given unviable.

We are thus led to conclude that when we view the problem of the transfer of institutions in this fashion, adjusting formal institutions to match informal institutions is, by the very nature of informal institutions, an impossible task because communicating the nature of tacit knowledge is, by definition, not feasible. To be more precise, it is the fact that the informal rules that are actually pertinent in this circumstance are tacit that makes this exercise unviable; here we are referring to manners, customs, and other interpersonal social norms. Simply assuming that specific rules of this class can be effortlessly transplanted, or assuming ex-ante that a congruence between potentially inconsistent formal rules and informal rules can be straightforwardly addressed if the appropriate knowledge is available, implies that the central matter, the tacit nature of informal rules, is being assumed away or not properly understood. In this way, dealing with the evolution and adaptation of informal rules and social norms may turn out to be impossible.

This discussion leads us to expect that comprehensive institutional transplants are unlikely to work. International experiences in Bentham's era tend to highlight this result. Before we proceed with a review along these lines it is important to explain that in many parts of Europe early legal nationalism took the form of codification precisely in the 18th and 19th centuries (Glendon et al., Reference Glendon, Carozza and Picker2008; see also David and Brierley, Reference David and Brierley1978). The first of these national codes appeared in the Scandinavian countries, although the better-known cases of codification are those of Prussia and the Code Napoleon. These codes highlight different modes of codification as surveyed here. The differing degrees of completeness in codification represent an important distinguishing factor among these experiences, and this is an area where one could undertake a comparison with Bentham's proposals, who, as suggested above, did not view the comprehensiveness of a code as an all-extensive regulation. While an examination in this sense surely represents a potentially interesting exercise, given our focus on the work by Bentham, and his determination that his theoretical work on codification illuminates the course of institutional design throughout the world during his era, here we will follow his regional interests.

Since the early 1810s Bentham proposed his services and was engaged in consultations, personally or through intermediaries, to draw codes for the United States, Russia, Poland, Geneva, Spain, Portugal, Tripoli, Greece, Buenos Aires, and Guatemala, roughly in that order. Earlier than that, starting in 1808, he even planned to relocate to Spanish America, first to Mexico and later to Venezuela, to work as a native legislator. The fact that the early 19th century was one of high activity in terms of constitutional thinking and experimentation is an important factor in terms of explaining Bentham's popularity in Spanish America (Williford, Reference Williford1980). However, notwithstanding his extensive correspondence and contacts regarding codification in Spanish America, it is important to note that his designs were never fully implemented in the region (nor elsewhere). This said, it is certainly the case that he was influential in other less-ambitious reforms, as well as in terms of providing an ideology to liberal politicians in the region.Footnote ¹⁵

Important consequences were, of course, at play in the process of institutional undertaken in early 19th century Latin America. The idea of the transplantation of institutions as proposed by Bentham is so interesting and relevant precisely for this reason. But the knowledge requirements imposed by this program should be taken seriously. Ignoring tacitness by implementing imported constitutional models as they are (and without previous discussion) could lead to disastrous consequences. These factors were not given appropriate consideration in Latin America during the period under consideration.

The history of early 19th century Spanish America shows that after the downfall of the Colonial system, new republican constitutions were enacted that were simply out of touch with the history and the reality of the region. Moreover, these new constitutions proclaimed grand principles, which were not adequately debated and maybe were even incomprehensible to the majority of the population in these countries (Halperín Donghi, Reference Halperín Donghi1973; Safford, Reference Safford and Bethell1985). The result was an extensive process of ‘cycling over institutions’.Footnote ¹⁶ If we consider the nine nations of South America (excluding Brazil), we find that during the 19th century 58 different constitutional documents were enacted, even when we exclude federal constitutions and provisional statutes of different sorts (Loveman, Reference Loveman1993: 370). The point here, then, is that the constitutions implemented in early 19th century Spanish America, some of which were very well-written documents and others not so, failed because they did not constitute effective coordination devices, which is the necessary attribute of a successful constitution. This, in turn, was due to the fact that they could not reflect the elements that defined the long-established institutional equilibrium, with its local and tacit fundamentals.Footnote ¹⁷

It is interesting to note that Alexis de Tocqueville expressed similar concerns in the context of his journey to America. In this manner he famously wrote that

Actually, in his Democracy in America, Tocqueville points to important features of American society that even Americans took for granted (Schleifer, Reference Schleifer2000). An argument could thus be made that this represents an instance of verbalizing tacitness; is it really possible that only an outsider can grasp what for natives are actually tacit norms?Footnote ¹⁹ Ex-post this would make Bentham's idea of giving preference to foreign legislators in the process of codification much more interesting (Bentham, Reference Bentham, Schofield and Harris1998: section 10). But this is an issue we can only present as a hypothesis here. The main point we wish to argue here is that it was a fundamental misunderstanding of the nature of the transfer of institutions in terms of the viability of adjusting formal rules with informal norms (of a tacit nature) that led to the institutional instability experienced in early 19th century Spanish America.