<P> In economics and economic history, the transition to capitalism from earlier economic systems was enabled by the adoption of government policies that facilitated commerce and gave individuals more personal and economic freedom . These included new laws favorable to the establishment of business, including contract law and laws providing for the protection of private property, and the abolishment of anti-usury laws . When property rights are less certain, transaction costs can increase, hindering economic development . Enforcement of contractual rights is necessary for economic development because it determines the rate and direction of investments . When the rule of law is absent or weak, the enforcement of property rights depends on threats of violence, which causes bias against new firms because they cannot demonstrate reliability to their customers . </P> <P> Much of this literature was built on the success story of the British state that after the Glorious Revolution of 1689 combined high fiscal capacity with constraints on the power of the king generating some respect for the rule of law . However, others have questioned that this institutional formula is not so easily replicable elsewhere as a change in the Constitution--and the type of institutions created by that change--does not necessarily create a change in political power if the economic powers of that society are not aligned with the new set of rule of law institutions . In England, a dramatic increase in the state's fiscal capacity followed the creation of constraints on the crown, but elsewhere in Europe, increases in state capacity happened before major rule of law reforms . </P> <P> There are many different ways through which states achieved state (fiscal) capacity and this different capacity accelerated or hindered their economic development . Thanks to the underlying homogeneity of its land and people, England was able to achieve a unified legal and fiscal system since the Middle Ages that enabled it to substantially increase the taxes it raised after 1689 . On the other hand, the French experience of state building faced much stronger resistance from local feudal powers keeping it legally and fiscally fragmented until the French Revolution despite significant increases in state capacity during the seventeenth century . Furthermore, Prussia and the Habsburg empire--much more heterogeneous states than England--were able to increase state capacity during the eighteenth century without constraining the powers of the executive . Nevertheless, it is unlikely that a country will generate institutions that respect property rights and the rule of law without having had first intermediate fiscal and political institutions that create incentives for elites to support them . Many of these intermediate level institutions relied on informal private - order arrangements that combined with public - order institutions associated with states, to lay the foundations of modern rule of law states . </P> <P> In many poor and developing countries much land and housing is held outside the formal or legal property ownership registration system . In many urban areas the poor "invade" private or government land to build their houses, so they do not hold title to these properties . Much unregistered property is held in informal form through various property associations and other arrangements . Reasons for extra-legal ownership include excessive bureaucratic red tape in buying property and building . In some countries it can take over 200 steps and up to 14 years to build on government land . Other causes of extra-legal property are failures to notarize transaction documents or having documents notarized but failing to have them recorded with the official agency . </P>

Explain the role of natural resources in the economic growth of the united states