Arnold Kling

Institutions and Growth

Arnold Kling, Great Questions of Economics
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Brink Lindsey quotes a Nobel Prize-winner on the importance of institutions for economic success.

"How effectively agreements are enforced is the single most important determinant of economic informance," states Douglass North, a pioneer in the fast-growing field of institutional economics. The rich countries of the West thrive because their institutions both the "hard" institutions of police, courts, and bureaucracies, and the "soft" institutions of cultural values allow agreements to be enforced between total strangers across the span of years and continents.

Discussion Question. Lindsey gives the example of being able to rent a car simply by presenting a piece of plastic. What institutional arrangements are necessary to make this possible?

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