Institutions matter: but which institutions? And how and why do they change?

Abstract

AbstractBoth political and economic institutions matter for economic growth and development, and are indissolubly connected: sustained economic growth requires far-reaching opening up of the economy and polity to wide participation. This review essay draws on three books which share this view of institutions, to develop an argument on which institutions matter most, and how and why they change. Like them, it uses history as laboratory. Northet al.(2009) inViolence and Social Ordersfocus on Britain, France and the United States, in which change was generally progressive, to study such change from the medieval to the modern period. Jan van Zanden inThe Long Road to the Industrial Revolutionlooks at Europe, 1000–1800, in particular the Netherlands and England, finding regressive as well as progressive change. Acemoglu and Robinson also examine both directions of change, inWhy Nations Fail:they range widely in space, but little before the 16th century. All three offer powerful tools of analysis. All have implications for policy-makers in advanced societies who wish to promote the development of ‘inclusive’ institutions elsewhere. Two striking surprises emerge, and oneprime mover– an institution with particular power to change others – the medieval Catholic church.