On the determinants of institutional design

Property rights are essential for economic development in a capitalist society but there may also be a need to control business. The institutional design of these rights could be based on a trade-off between the cost of regulation and the social cost of private expropriation. However, democracies follow their own dynamic pattern. The political history of the US shows that periods with regulation and periods with relatively more freedom for business alternate. In the paper the succession of periods is modelled by applying the Lotka-Volterra model of predator-prey interaction.