804 North and Weingast A ruler can establish such commitment in two ways.One is by setting a precedent of"responsible behavior,"appearing to be committed to a set of rules that he or she will consistently enforce.The second is by being constrained to obey a set of rules that do not permit leeway for violating commitments.We have very seldom observed the former,in good part because the pressures and continual strain of fiscal necessity eventually led rulers to "irresponsible behavior''and the violation of agreements.The latter story is,however,the one we tell. We attempt to explain the evolution of political institutions in seventeenth-century England,focusing on the fundamental institutions of representative government emerging out of the Glorious Revolution of 1688-a Parliament with a central role alongside the Crown and a judiciary independent of the Crown.In the early seventeenth century fiscal needs led to increased levels of"arbitrary''government,that is, to expropriation of wealth through redefinition of rights in the sover- eign's favor.This led,ultimately,to civil war.Several failed experi- ments with alternative political institutions in turn ushered in the restoration of the monarchy in 1660.This too failed,resulting in the Glorious Revolution of 1688 and its fundamental redesign of the fiscal and governmental institutions. To explain the changes following the Glorious Revolution we first characterize the problem that the designers of the new institutions sought to solve,namely,control over the exercise of arbitrary and confiscatory power by the Crown.We then show how,given the means,motives,and behavior of the king during this century,the institutional changes altered the incentives of governmental actors in a manner desired by the winners of the Revolution.These changes reflected an explicit attempt to make credible the government's ability to honor its commitments.Explicit limits on the Crown's ability unilaterally to alter the terms of its agreements played a key role here, for after the Glorious Revolution the Crown had to obtain Parliamentary assent to changes in its agreements.As Parliament represented wealth holders,its increased role markedly reduced the king's ability to renege. Moreover,the institutional structure that evolved after 1688 did not provide incentives for Parliament to replace the Crown and itself engage in similar"irresponsible"behavior.As a consequence the new institu- tions produced a marked increase in the security of private rights. As evidence in favor of our thesis,we study the remarkable changes in capital markets over this period.After the first few years of the Stuarts'reign,the Crown was not able systematically to raise funds.By 1 Our discussion of the events prior to the Glorious Revolution(1603 to 1688)simply character- izes this period;it does not model or explain it.Moreover,since our history emphasizes the problems the winners (the Whigs)sought to solve,it necessarily contains strong elements of "Whig"history.North and Weingast A ruler can establish such commitment in two ways. One is by setting a precedent of "responsible behavior," appearing to be committed to a set of rules that he or she will consistently enforce. The second is by being constrained to obey a set of rules that do not permit leeway for violating commitments. We have very seldom observed the former, in good part because the pressures and continual strain of fiscal necessity eventually led rulers to "irresponsible behavior" and the violation of agreements. The latter story is, however, the one we tell. We attempt to explain the evolution of political institutions in seventeenth-century England, focusing on the fundamental institutions of representative government emerging out of the Glorious Revolution of 1688-a Parliament with a central role alongside the Crown and a judiciary independent of the Crown. In the early seventeenth century fiscal needs led to increased levels of "arbitrary" government, that is, to expropriation of wealth through redefinition of rights in the sover￾eign's favor. This led, ultimately, to civil war. Several failed experi￾ments with alternative political institutions in turn ushered in the restoration of the monarchy in 1660. This too failed, resulting in the Glorious Revolution of 1688 and its fundamental redesign of the fiscal and governmental institutions. To explain the changes following the Glorious Revolution we first characterize the problem that the designers of the new institutions sought to solve, namely, control over the exercise of arbitrary and confiscatory power by the Crown.' We then show how, given the means, motives, and behavior of the king during this century, the institutional changes altered the incentives of governmental actors in a manner desired by the winners of the Revolution. These changes reflected an explicit attempt to make credible the government's ability to honor its commitments. Explicit limits on the Crown's ability unilaterally to alter the terms of its agreements played a key role here, for after the Glorious Revolution the Crown had to obtain Parliamentary assent to changes in its agreements. As Parliament represented wealth holders, its increased role markedly reduced the king's ability to renege. Moreover, the institutional structure that evolved after 1688 did not provide incentives for Parliament to replace the Crown and itself engage in similar "irresponsible" behavior. As a consequence the new institu￾tions produced a marked increase in the security of private rights. As evidence in favor of our thesis, we study the remarkable changes in capital markets over this period. After the first few years of the Stuarts' reign, the Crown was not able systematically to raise funds. By Our discussion of the events prior to the Glorious Revolution (1603 to 1688) simply character￾izes this period; it does not model or explain it. Moreover, since our history emphasizes the problems the winners (the Whigs) sought to solve, it necessarily contains strong elements of "Whig" history