DEFINITION of 'Constitutional Economics - CE'

A branch of economics which focuses on the conditions that exist in and choices constrained by the legal framework of a political constitution. Constitutional economics principles are used to estimate how a country or political system will grow economically, since a constitution limits what activities individuals and businesses can legally participate in.

BREAKING DOWN 'Constitutional Economics - CE'

Constitutional economics emerged as a field of study in the 1980s. The field is seen as playing a part in developing countries - and countries that are changing political systems - because it involves the study of how legal frameworks influence economic development. One of the focuses of constitutional economics is the interplay between the economic and political rights of citizens compared to the level of state control of resources and institutions.

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