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Times Higher EducationAnyone with an interest in world poverty can benefit from this carefully crafted and closely argued book. It is a pleasure and a delight to read.
— Paul Ormerod
In this landmark work, a Nobel Prize-winning economist develops a new way of understanding the process by which economies change. Douglass North inspired a revolution in economic history a generation ago by demonstrating that economic performance is determined largely by the kind and quality of institutions that support markets. As he showed in two now classic books that inspired the New Institutional Economics (today a subfield of economics), property rights and transaction costs are fundamental determinants. Here, North explains how different societies arrive at the institutional infrastructure that greatly determines their economic trajectories.
North argues that economic change depends largely on "adaptive efficiency," a society's effectiveness in creating institutions that are productive, stable, fair, and broadly accepted—and, importantly, flexible enough to be changed or replaced in response to political and economic feedback. While adhering to his earlier definition of institutions as the formal and informal rules that constrain human economic behavior, he extends his analysis to explore the deeper determinants of how these rules evolve and how economies change. Drawing on recent work by psychologists, he identifies intentionality as the crucial variable and proceeds to demonstrate how intentionality emerges as the product of social learning and how it then shapes the economy's institutional foundations and thus its capacity to adapt to changing circumstances.
Understanding the Process of Economic Change accounts not only for past institutional change but also for the diverse performance of present-day economies. This major work is therefore also an essential guide to improving the performance of developing countries.
"[North] sets forth a radical reconceptualization of the task and methods of the social sciences in general and economics in particular, providing a glimpse at an economics that refuses to 'assume a can opener.'"—Will Wilkinson, Cato Journal
"[This book] provides a sweeping view of the relationships among human belief systems, social institutions, and what [North] calls 'the adaptive efficiency' of societies in coping with changes in demographics, technology, and other factors."—Richard N. Cooper, Foreign Affairs
"A courageous attempt to enlarge the arsenal of theoretical tools available for economists."—Diego Rios, Journal of Evolutionary Economics
Chapter 1 An Outline of the Process of Economic Change 1
Part I The Issues Involved in Understanding Economic Change 9
Chapter 2 Uncertainty in a Non-ergodic World 13
Chapter 3 Belief Systems, Culture, and Cognitive Science 23
Chapter 4 Consciousness and Human Intentionality 38
Chapter 5 The Scaffolds Humans Erect 48
Chapter 6 Taking Stock 65
Part II The Road Ahead 81
Chapter 7 The Evolving Human Environment 87
Chapter 8 The Sources of Order and Disorder 103
Chapter 9 Getting It Right and Getting It Wrong 116
Chapter 10 The Rise of the Western World 127
Chapter 11 The Rise and Fall of the Soviet Union 146
Chapter 12 Improving Economic Performance 155
Chapter 13 Where Are We Going? 166
Posted December 29, 2012
Posted December 28, 2012