It has been accepted to most policy and development economists that among the most important sets of institution in an economy are those that provide for enforcement of contracts. Grief (1994) illustrates it with two kinds of actors, merchants and agents. Agents carry out overseas trade on behalf of merchants. One merchant chooses either collectivist or individualistic enforcement of his contracts with agents. The collectivistic enforcement entails punishing, by refusing to hire, an agent who is known to have cheated a merchant in collective group. The individualistic enforcement entails a merchant's punishing only agent who has cheated him. Grief shows that if the merchant believes that collectivist enforcement is likely to occur, it will not be in his interest to hire an agent who had cheated someone in the group of merchants. In the short run individualistic enforcements will be more costly since it forges strongergroup level punishment, mechanism, but in the long run it will strengthen the forces that contribute to the emergence of formal state level mechanisms to enforce contracts. Such activities tend to promote long run growth.