Institutions and economic growth: An historical introduction

Abstract

In this essay the interdependence of political and economic institutions is examined against premises in neoclassical theories of economies, which maintain that population and savings are the principal determinants of economic growth. That institutions matter in the development of economies is the difference in assumptions I examine. I look at the institutional frameworks that preceded adoption of the United States Constitution and the Northwest Ordinance in early America. I then trace the precedents of these American institutions to the evolution of common law in England, where interests unconcerned with the Crown coalesced to form competing political units. I then contrast England's institutional development with the comparatively centralized enforcement mechanisms of Spain to examine the hypothesis that institutional differences produce economic consequences.