Institutions, Institutional Change and Economic Performance (Political Economy of Institutions and Decisions)

Features

• Cover Type: Paperback with 159 pages
• Published by: Cambridge University Press October 26, 1990
• Written in: English
• ISBN 10 Number: 0521397340
• ISBN 13 Number: 978-0521397346
• Book Dimensions: 8.9 x 6 x 0.6 inches
• Weighs: 1 pounds

Product Review
"At a time when economic and political institutions are being reformed and replaced all over the world, North's book is required reading for all social scientists and policy makers." T.N. Srinivasan, Yale University

"North here draws upon the literature concerning the formation of economic institutionsto ask significant questions about differences among economies across time and spaceThis is an exciting and stimulating work, and one that will leave its mark upon the work of economic historians. It will also be important for political scientists and other social scientists, to learn the message and relevance of an influential strain of non-mainstream economic thinking." Stanley Engerman, University of Rochester

"In a careful but wide-ranging analysis grounded in rational-choice theory, he stresses the ways in which institutional arrangements, once adopted, may lead quite rational actors to behave in ways that are collectively suboptimal." Paul Pierson, World Politics

Product Description
Continuing his groundbreaking analysis of economic structures, Douglass North develops an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time. Institutions exist, he argues, due to the uncertainties involved in human interaction; they are the constraints devised to structure that interaction. Yet, institutions vary widely in their consequences for economic performance; some economies develop institutions that produce growth and development, while others develop institutions that produce stagnation. North first explores the nature of institutions and explains the role of transaction and production costs in their development. The second part of the book deals with institutional change. Institutions create the incentive structure in an economy, and organizations will be created to take advantage of the opportunities provided within a given institutional framework. North argues that the kinds of skills and knowledge fostered by the structure of an economy will shape the direction of change and gradually alter the institutional framework. He then explains how institutional development may lead to a path-dependent pattern of development. In the final part of the book, North explains the implications of this analysis for economic theory and economic history. He indicates how institutional analysis must be incorporated into neo-classical theory and explores the potential for the construction of a dynamic theory of long-term economic change. Douglass C. North is Director of the Center of Political Economy and Professor of Economics and History at Washington University in St. Louis. He is a past president of the Economic History Association and Western Economics Association and a Fellow, American Academy of Arts and Sciences. He has written over sixty articles for a variety of journals and is the author of The Rise of the Western World: A New Economic History (CUP, 1973, with R.P. Thomas) and Structure and Change in Economic History (Norton, 1981). Professor North is included in Great Economists Since Keynes edited by M. Blaug (CUP, 1988 paperback ed.)

Reader Reviews
An intriguing book on the so-called neo-institutionalist approach by one of its long-time proponents, Douglass C. North. Written without accessive jargon, this book is accessible to any intermeidate level student of Economics and Political Science. North argues that institutions (laws, rules, regulations) in their fromal and informal varieties determine economic performance. North has an almost guru-like status in the eyes of the World Bank. Third World countries remain poor, argues new institutionalism, because their institutions foster corruption and distort incentives. But what is the solution? It is hard to imagine that one can graft institutions. How can the rules that function in the U.S. function under all kinds of social and political circumstances? The other troubling point is that it is still hard to integrate this approach with mainstream economics. A serious economist today is trained to shy away from anything that cannot be mathematically modeled. More troubling, however, is the following: neo-institutionalism argues that rules, laws, and regulations structure incentives, which in turn determine economic performance. A thoughtful person probably guessed this a long time ago based on common sense--one does not need a scholarly approach to advocate this position. "Incentives are the underlying determinants of economic performance," says North (p. 135). It is hard to disagree.