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.)

Product Details

• Amazon Sales Rank: #116850 in Books
• Published on: 1990-10-26
• Original language: English
• Number of items: 1
• Binding: Paperback
• 159 pages

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 institutions...to ask significant questions about differences among economies across time and space...This 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

Customer Reviews

Realistic and Relevant
These are strange times in the economics profession. Most economists insist upon representing actual economic systems with mathematical models that bear little resemblance to reality. The results of these models are often quite strange. Government deficits are offset by taxpayers who save more money in anticipation of higher future taxes. Monetary policy is neutral; it has no real predictable effects. We are in equilibrium in every phase of the business cycle. Investors might as well pick stocks by throwing darts. Economic analysis is judged by its formalism, not its realism.

This book by Douglass North is a refreshing change from `economics as usual'. Here the factors that matter most are real institutions and actual history. North draws upon the right kind sources for his theoretical underpinnings (Coase, Hayek, Ostrom, Olson, Veblen- yes Veblen too). North also focuses on an issue of primary importance- economic performance through time. How does economic development happen? Why does it happen in some nations and not others?

There are some important ideas here. We need to think in terms of adaptive efficency (p80-81). Incremental changes in institutions comes from entrepreneurs (p8). We should understand institutional change in terms of transaction costs, relative prices, and ideology (p86). North has constructed a theory of institutional change using a blend of common sense and subtlety that is rare in modern economics. This book should be required reading for all econ grad students.

There are some historical examples sprinkled through this book. Personally, I would have liked to see more history. But it is still the case that there is more history here than one typically finds in contemporary economics. Institutions, Institutional Change, and Economic performance is not easy reading, but it is easier to read and vastly more informative than the math models that most economists try to pass off as proper economic analysis.

A good... but not great.. book....
I have a hunch that this is one of the kind of books such that only people whom have in a sense already specialized come upon it and decide to buy it. First: if you are one of these kind of people, the articles contained in this volume are well written and though not classics, could further your understanding of 'our' field. Second: if you are not already a specialist, there are other books by Douglass North and Mancur Olson that can better illustrate the general principles on which the economic/political hybrid field is based.... Olson's "The Logic of Collective Action" illustrates the development of institutions while Norths "Structure and Change..." shows how they have functioned throughout time...

Excellent overview of new institutional economics
If you ever wondered what new institutional economics is all about take this book. While it may be helpful to have an economics background the content is accessible to a wider audience. It is an absolute must for everyone who is interested in the interaction of political, social, cultural, religious, and historical elements in economic growth and policy. As a former student of North I love coming back to this book and everytime you get something new out of it.