ABSTRACT
The economics of institutions, so influential in the study of economic history and economic development, has given a prominent role to contract enforcement. This chapter discusses transactions between merchant and artisan, lender and borrower, planter and migrant worker and discusses the contractual problems in the procurement process. It also discusses three cases, which cover a range of outcomes, from success (opium) to initial success followed by collapse (indigo), with textiles being an intermediate outcome. However, to understand the indigo-opium contrast, people also cannot rule out the factor alluded to earlier: the government's failure to regulate the behaviour of the indigo planters. Some of the most important legal changes in the colonial period concerned the enforcement of credit contracts. The chapter argued that the literature to date has typically (and appropriately) emphasized power asymmetries between principal and agent but that intrinsic contractual problems common to developing economies deserve more consideration.
