Comments on A Farewell to Alms Gregory Clark Comments by Karla Hoff An alternative introduction to the paper would be this: A puzzle in economics is “institutional overhang”—the persistent effect of institutions long after they are abolished. This problem is has moved to front and center ini the analysis of economic development (Engerman-Sokoloff, AJR, Banerjee-Iyer) . This problem is also often raised in popular discussions of why African Americans continue to lag behind by most measures of economic performance, to a degree that is unlikely to be explained by discrimination alone. This problem is important because institutional overhang can make it difficult to reform the institutional environment. Although popular writers often call attention to the role of culture as the “carrier of histroy” is {the last phrase is from Paul David], little is know about this (Acemoglu explicits says this in one of his published comments]. One obvious candidate as the “carrier of history” are preferences and norms. Formal institutions shape the environment, which may shape preferences. That effect may persist long after both the formal institutions, and the economic and political forces that gave rise to the formal instiutitons, have changed. Here we examine the overhang of social excluson on one paritcular informal institution—norms for implicit contract enforcement. Such norms depend on preferences … The standard approach in economics treats preferences as exogenous. Two kinds of literature… Henrich et al. Burkes….For early work that discussed the pscyhologicla ltierature, see “Human Relationsin te Worlkpalce.” Here we ask, … [on culture, see Zingales’ recent work]]

Radically new view of the “Great Divergence” A change in human nature (its culture and perhaps even its genes) explains the Industrial Revolution and also the Great Divergence How did this occur?

History affects preferences through selection effects in a Malthusian world Cultivation and diffusion of the values of the successful in 1200-1800 in England in an institutionally stable society of private property rights with tight Malthusian constraints and income-based difference in fertility Bourgeois values penetrated every layer of society Preferences shaped by culture and perhaps even genes, that shape quality of the work force Institutions

Are such preferences all that matter? Empirical hurdles to this thesis .Engerman-Sokoloff (1997, 2005, 2005, 2006) on New World economies: Great diversity in paths of development across the many New World societies with a British heritage. Most did not fare so well as the US and Canada, and resemble their neighbors that began with similar factor endowments but with other national heritages: E.g. Jamaica, Guyana, Belize s..

Embedding Clark’s thesis in Engerman and Sokoloff’s thesis Factor endowments, broadly defined Inequality of wealth and political influence Institutions Preferencesthat affect quality of work force Incomes

Factor endowments, broadly defined Farewell to Alms? Factor endowments, broadly defined Inequality of wealth and political influence Institutions Preferencesthat affect quality of work force Incomes ********* **********