Browsing by Author "North, Douglass C."

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Dealing with a Non-Ergodic World: Institutional Economics, Property Rights, and the Global Environment
(1999) North, Douglass C.
"For the world of semi-impersonal exchange, Elinor Ostrom has probably done more than anybody else in her work examining common pool problems and ways in which we can effectively structure problems involving common property. Ostrom's work in the field, as well as the theoretical work that she has done, has made her a pioneer. In her book, Governing the Commons, she has a list of commandments for solving common pool problems. n9 These commandments are very sensible. When I have been concerned with specific problems at relatively local levels and have tried to devise institutional structures that work, Ostrom's advice and sage thoughts have been extremely valuable."
Economic Performance through Time: The Limits to Knowledge
(1996) North, Douglass C.
"In this essay I propose to explore what we can and cannot learn about the way economies evolve over time. The focus of the essay is on the dynamics of change--political, social, and of course economic; and therefore the key word is time. In section I I outline the process of economic change as I understand it; in section II I specify the questions we must answer in order to understand that process; in the final section I tentatively identify which of those questions I believe are amenable to being answered with sufficient research and which I believe to be beyond our ability to answer. I need hardly add that my conclusions are highly speculative."
The Evolution Of Efficient Markets In History
(1994) North, Douglass C.
"I take my text from Max Hartwell: '...but no historian has detailed the steps by which for example, the market economy was achieved in terms of government action or changing law; no historian has linked mercantilist with laissez-faire law to trace the chronology of legal and economic change. In this neglect, surely a major element for understanding of the industrial revolution has been overlooked.' And Max might have added that in consequence of our failure to analyze how a market economy was achieved in history we have not been able to provide guidance for policy makers in the present world who are attempting to restructure failed centrally planned economies. A first step in meeting Max's challenge is to delineate the institutional characteristics of market economies in order that we may then explore their historical evolution."
Five Propositions about Institutional Change
(1993) North, Douglass C.
"The five propositions about institutional change are: 1) The continuous interaction between institutions and organizations in the economic setting of scarcity and hence competition is the key to institutional change. 2) Competition forces organizations to continually invest in skills and knowledge to survive. The kinds of skills and knowledge individuals and their organizations acquire will shape evolving perceptions about opportunities and hence choices that will incrementally alter institutions. 3) The institutional framework provides the incentives that dictate the kinds of skills and knowledge perceived to have the maximum pay-off. 4) Perceptions are derived from the mental constructs of the players. 5) The economies of scope, complementarities, and network externalities of an institutional matrix make institutional change overwhelmingly incremental and path dependent."
Institutional Change: A Framework of Analysis
(1994) North, Douglass C.
"In the following pages, I sketch out a framework for analyzing institutions. This framework builds on the economic theory of choice subject to constraints. However it incorporates new assumptions about both the constraints that individuals face and the process by which they make choices within those constraints. Too many gaps still remain in our understanding of this new approach to call it a theory. What I do provide are a set of definitions, principles, and a structure which provide much of the scaffolding necessary to develop a theory of institutional change."
Institutional Competition
(1994) North, Douglass C.
"My assignment for this conference is to explore the relevance of 'institutional competition' as a deliberate strategy in improving the competitiveness of economies. The historical record gives us a very mixed response with respect to the success of economies in deliberately altering the institutional framework and thereby improving performance. In what follows I shall first describe the nature of institutional change (I); briefly explore the historical record (II); then derive some lessons from that history that may have present day relevance (III)."
Institutions and Credible Commitment
(1994) North, Douglass C.
"In this essay I intend to assess the road we have traveled in the ten years since the first conference on Institutional Economics with the objectives of suggesting where we should go from here. The suggestions will be personal reflecting both my special interests as an economic historian and my undoubtedly subjective perceptions of the road we have traveled and of an agenda of research. The title of my essay gives away the key questions that I believe we must answer. How have economies in the past developed institutions that have provided the credible commitment that has enabled more complex contracting to be realized; and what lessons can we derive from that experience that will be of value today in the on going process of building or rebuilding economies?"
Institutions and Productivity in History
(1994) North, Douglass C.
"The argument of this essay is that productivity increases result from both improvements in human organization and from technological developments. Indeed it is probably true that the former is as important as the latter in economic growth. In the following sections I first lay out the theoretical justification for this argument (I), then explore some of the key institutional changes in history that have laid the foundation for modern economic growth (II), explore the interplay between institutional and technological changes in the past 150 years,the era of the 2nd economic revolution (III), discuss the institutional and transaction cost changes that have characterized that revolution (IV) and conclude with some implications and questions that this analysis poses for future productivity change and economic growth (V)."
Institutions Matter
(1994) North, Douglass C.
"Successful development policy entails an understanding of the dynamics of economic change if the policies pursued are to have the desired consequences. And a dynamic model of economic change entails as an integral part of that model analysis of the polity since it is the polity that specifies and enforces the formal rules. While we are still some distance from having such a model the structure that is evolving in the new institutional economics, even though incomplete, suggests radically different development policies than those of either traditional development economists or orthodox neo-classical economists. Development economists have typically treated the state as either exogenous or as a benign actor in the development process. Neo-classical economists have implicitly assumed that institutions (economic as well as political) don't matter and that the static analysis embodied in allocative-efficiency models should be the guide to policy; that is 'getting the prices right' by eliminating exchange and price controls. In fact the state can never be treated as an exogenous actor in development policy and getting the prices right only has the desired consequences when you already have in place a set of property rights and enforcement that will then produce the competitive conditions that will result in efficient markets."
Institutions, Organizations and Market Competition
(1996) North, Douglass C.
"In this essay I would like to apply the new institutional economics to suggest modifications of the theory we employ in economics to make that theory useful for the study of the performance of economies through time. The modifications I shall suggest are in the spirit of Joseph Schumpeter."
Institutions, Transaction Costs and Productivity in the Long Run
(1993) North, Douglass C.
"The argument of this essay is that the immense productivity increases resulting from technological developments of the past century and a half could only be realized by fundamental changes in the institutional and organizational structure--a supply side argument; and that the consequent tensions induced by the resulting societal transformation have resulted (and are continuing to result) in politically-induced fundamental changes in the institutional structure to mitigate these tensions--a demand side argument. Both the supply side and demand side institutional changes have been and continue to be fundamental influences on productivity change."
The New Institutional Economics and Development
(1993) North, Douglass C.
"In this essay I intend to briefly summarize the essential characteristics of the new institutional economics, to describe how it differs from neo-classical theory, and then to apply its analytical framework (as I see it) to problems of development."
The Paradox of the West
(1993) North, Douglass C.
"A central thesis of this chapter is that economic growth and the development of freedom are complementary processes of societal development. Economic growth provides the resources (and leisure) to support more complex societies; and it is unlikely to persist in the long run without the development of political and civil liberties. A world of specialization and division of labor--the roots of economic growth--is going to nurture democratic polities and individual freedoms."
Privatization, Incentives and Economic Performance
(1994) North, Douglass C.
"In this essay I argue that it is the way institutions evolve that shapes long run economic performance. By institutions I mean formal rules--political and economic-- and informal constraints--such as conventions and norms of behavior as well as the characteristics of enforcement of both. To be successful, privatization must take into account this larger framework of institutions. In subsequent sections I examine 1) The efficiency characteristics of long run economic growth; 2) the nature of institutions; 3) the character of institutional change; 4) the institutional requirements of modern economies; 5) the complex problems of establishing efficient markets; and finally 6) the critical assumptions in neo-classical theory that are at issue."
The Process of Economic Change
(1997) North, Douglass C.
"We know a good deal about what makes for successful development. We know very little about how to get there - that would entail understanding the process of economic change. This paper briefly deals with the sources of successful growth and then explores the process to growth."
The Role of Institutions in Economic Development
(2003) North, Douglass C.
"I am going to talk to you about institutions and economic development and I am going to be concerned with two issues. One of them is what makes dysfunctional economies or economies that do not work well and the second is what can we do about it. Now that is a neat job to do in an hour. So I will be giving you a very quick and superficial covering of many and very complex subjects. "I begin with the theory we use to understand the problems. Neoclassical economics was never intended to deal with the issues of economic development. It evolved in the late nineteenth century and its objective was to explain efficient resource allocation in developed economies. It had two gigantic failures as far as our subject matter here is concerned. One, it was frictionless; two, it was timeless, static rather than dynamic in terms of its issues. I am going to talk first about how to deal with frictions; next I shall explore the behavioral assumption that underlies neoclassical theory. Then we can turn to the role of time and then be ready to lay out the problems of development and, in the time remaining, see what we can do about them."
Some Fundamental Puzzles in Economic History/Development
(1997) North, Douglass C.
"In this essay I would like to confront a number of fundamental puzzles in economic history/development--puzzles that go to the heart of the nature of economic change. They can be broadly classified under two general headings: how to account for the uneven and erratic pattern of both historical change and contemporary development and how to model this processs of change and development? Can we use the tools at hand -- i.e. the rationality assumption and growth theory we employ in economics? Let me elaborate on the nature of the puzzles and the connection between them."
Transaction Costs through Time
(1994) North, Douglass C.
"An economic definition of transaction costs are the costs of measuring what is being exchanged and enforcing agreements. In the larger context of societal evolution they are all the costs involved in human interaction over time. It is this larger context that I wish to explore in this essay. The concept is a close kin to the notion of social capital advanced by James Coleman (1990) and applied imaginatively to studying the differential patterns of Italian regional development by Robert Putnam in 'Making Democracy Work' (1993). This essay, therefore, is a study in economic history which focuses on the costs of human coordination and cooperation through time which I regard as the key dilemma of societies past, present and future."
Where have We Been and Where are We Going?
(1996) North, Douglass C.
"Improving our understanding of the nature of economic change entails that we draw on the only laboratory that we have--the past. But 'understanding' the past entails imposing order on the myriad facts that have survived to explain what has happened--that is theory. To begin we need to assess what we have learned from the past and then assess the usefulness of the tools at hand -- i.e. the rationality assumption and growth theory we employ in economics? We will then go on to explore in subsequent sections some recent development that offer the promise of improving our understanding of the past and of where we are going."