Objective: It is widely accepted that good institutions caused modern economic prosperity. But what caused good institutions? In this article we challenge recent explanations that favor state capacity, pointing instead to the polycentric governance structures of medieval Europe. Methods: We develop a novel theory of constitutions, which we call “polycentric sovereignty,” based on political property rights. We use this theory to reinterpret the historical evidence concerning the relationship between the medieval patrimony and good governance. Results: Our analysis suggests the de facto balance of power among the “owners of the realm” in medieval Europe are crucial in explaining the rise of pro-growth institutions, especially those that respect and uphold the rule of law. Conclusion: Medieval institutions set the background conditions for good governance. We cannot understand the bounty of economic modernity without reference to the received political-economic traditions from medieval Europe.