Douglass North, On One Foot
By Arnold Kling
Ayn Rand famously summarized her philosophy while standing on one foot. Arnold, would you be willing to summarize North’s “well-developed and persuasive answer” under the same constraint? Anyone else?
Before doing that, I want to mention that the original “standing on one foot” story goes back a bit before Ayn Rand. Also, I should mention that a commenter on my post asked a similar question. Here is my answer:
You ask an excellent question. I’ll probably write an essay in response. Off the top of my head, North’s big ideas include:
1. Economics is not ahistorical. You can’t just jump arbitrarily from one economic pattern to another. For example, you can’t turn Russia or Iraq into a western economy overnight.
2. Institutions evolve from history, technology, and cultural beliefs. And institutions are what lock in economic patterns.
3. If the institutions evolve to reward work and innovation, you will get work and innovation. If they evolve to reward piracy and expropriation, you will get underdevelopment.
If you try to reduce North to a bumper sticker, it would be “Institutions matter.” But that phrase alone (which is probably all that most economists know if you ask them about North) does not convey the subtler points of his thinking.