Elites, institutions and growth

Abstract

I discuss the debate between North and Thomas and Clark. I argue institutions do not cause growth, but institutional change does. I expound a theoretical model where the circulation of elites entails endogenous institutional change and growth. I prove a generation taken in isolation can increase its welfare by a unilateral reduction in institutional change, in societies where groups that compete for accession to the ruling class are relatively smaller in size; and by a move to more, in societies where those groups are relatively larger. I prove the former are dynamically efficient societies; and the latter, dynamically inefficient.