1. 7. Institutions & Development
COMMENTS
Gareth Austin 7/11/2012

2. Preface: on the alternatives to an institutional approach
‘Geography’: in my view, more useful to re-define this as changing factor endowments and environmental constraints – the changes driven primarily by human responses to the environment
‘Culture’: Buddhism & the East Asian Tigers is indeed a good example of the limits of explanations that see culture as an exogenous and negative variable; another is the end of the ‘Hindu equilibrium’ growth rate in India

3. On ‘New’ or Rational-Choice Institutionalism
Same thing, almost entirely
With (overlapping) sub-divisions in different social science disciplines
Origins: what Bates calls a ‘crisis of embarrassment’
Definition: the project of extending the economizing logic of neoclassical economics to explain the rules surrounding economic activity
The real founder: Ronald COASE (1934, 1960)
But the paradigm became so influential only later, via North and others

4. Causes & Consequences of Particular Institutions
2 different questions
NIE explains origin of institutions as an economically-rational response to circumstances (especially relative price shifts, e.g. if land becomes scarce, individual land tenure is supposed to be strengthened), mediated by political coalitions (North)
But an explanation of very limited power, empirically …
Though, I think, still useful heurestically: e.g. does not explain eventual colonial prohibition of slavery in Africa, but helps explain delay in implementation, and whether or not it was succeeded by wage labour
NIE predicts consequences, e.g. secure individual property rights supposed to be essential for economic development
but see Clarke et al reading on China

5. Defining Institutions
In rational-choice institutionalism, the short def. is: rules, formal and informal
‘the humanly devised constraints that shape human interaction’ (North, Institutions, 1990: 3)
Laws & customs: e.g. distinction between 2 of the presenters’ examples (security camera & Geneva public transport system)
Distinction between institutions & organizations (though Avner Greif includes the latter in the former institutions)

6. What Institutions Do Shape the incentive structure, yes
But also allocate assets within society, or perpetuate the existing allocation of them
‘Exclusivity’ a key attribute of property rights, for both the above purposes

7. The So-Called ‘Extractive’ v ‘Inclusive’ Distinction
Related to the (in my view fallacious) tendency to define ‘economic rent’ and ‘economic growth’ (& their ‘respective’ pursuit) as necessarily alternatives: contrary to most historical experience.
Does the ‘reversal of fortune’ go much further than the 4 ‘neo-Britains’?
For latter, see (a) Olsson, ‘Unbundling ex-colonies’, Working Papers in Economics 146, Göteburg University 2004), (b) Fails & Krieckhaus, ‘Colonialism, property rights & the modern world income distribution’, British Journal of Political Science 40 (2010),

8. On Very Long-Term History: (1) English
Alternative interpretations: liberal, marxist etc:
e.g. which C17th revolution was decisive, or the more conservative one of 1688?
Historical change does not need to be gradual to be ‘natural’; and connections matter as well as comparisons, e.g. origins of US institutions
North, Acemoglu & Johnson etc
Stories of origins of English/British/American development: liberal ‘myth’ of 1688, compared (or should be combined with?) alternative explanations

9. On Very Long-Term History: (2) European colonialism
Only overseas colonization begin C15: empire the ‘de fault’ mode of political organization for most of human history (J. Darwin 2007)
European colonization was begun by societies not usually regarded as capitalist, though they were beginning to become so
Don’t forget the original dispossessions!

10. On Very-Long Term History (3) ‘South’ NOT starting from zero
Non-Western countries were not ‘starting’ from nothing, in 1500 or 1800
Contribution of Tokugawa (early modern) legacy to late 19th/early 20th century industrialization in Japan
Kenneth Pomeranz, The Great Divergence on ‘world of surprising resemblances’ of early modern period:
Real distinction perhaps that W European economic growth (etc?) started later but was much more continuous, c.1000 to 1800 and onwards (S. R. Epstein)

11. ‘Exceptions that prove the rule’
‘Exceptions that prove the rule’? The treatment of outliers in different institutionalist models
Not leaving outliers exogenous matters for the quality of the explanation -- logical economy
Bates 1981’s model of a stable high-rentseeking equlibrium in postcolonial African countries was good in this respect (at least)
Do AJR match it? The case of Botswana (as discussed in 3rd lecture)

12. Alternative institutional paths
Significance of difference between Anglo-American and German/continental Eur. banking traditions
Example of Meiji Japan’s selectivity, on a whole range of institutions and techniques, among Western models and between Western and Sino-Japanese models

13. Democracy & Development
Direction of causality?
Historical examples of industrialization with labour coercion and restricted (or no) sufferage: Britian, USA, Germany, Japan, South Korea, Taiwan …
Harder to think of exceptions? (cf. Chang)
Important historical distinction between representative government and (fully) democratic government

14. CONCLUSON Many thanks for a fascinating presentation & discussion!
See you this FRIDAY!