Sebastian Galiani

S. Galiani and I. Sened (eds.), 2014. Institutions, property rights and economic growth: The legacy of Douglass North, Cambridge University Press.

Douglass C. North earned himself a place among the most influential social scientists of his era, something that was recognized in 1993 when he shared the Nobel Memorial Prize in Economics with economic historian Robert Fogel for their work in economic history. In 1959, North was a founder of cliometrics, a group of economic historians that systematically applied statistical methods and economic theory to the study of history. However, by the late 1960s, his ideas about institutions and their central role in the study of economics began to evolve and dominated his work. Later, during the 1970s, he was also a founder of the New Institutional Economics, a group of social scientists that expanded the reach of standard economic analysis by taking into account transactions costs, and the importance of institutions and organizations as critical determinants of social phenomena in terms of processes, actions and outcomes. It has had a strong effect on all of the social sciences, but its most remarkable influence is felt in political science and economics. The purpose of this volume is to showcase the essence and the impact of his work through several exemplars that best illustrate its broad reach as well as the depth of its essence.

In the first chapter to this volume, Claude Menard and Mary Shirley thoroughly review the rise of New Institutional Economics, giving special attention to the evolution of Douglass North’s ideas and how they shaped the emerging field of New Institutional Economics.

John Wallis recounts the evolution of Douglass North’s ideas, but he does so through the lenses of the persistence and change of institutions in society. His essay explores North’s intuitive reaction to the literature on the persistence of institutions and his insistence that the problem we should be investigating is institutional change.

Robert Bates goes a step further in advancing the field of New Institutional Economics, arguing that this school of thought has failed to pay enough attention at those who play the central role in all political institutions.

Kenneth Shepsle’s contribution to this volume represents a central debate in contemporary social sciences, between those who do not see any stability in ‘collective’ choice environments and those who suggest that institutional structures may introduce some generic stability and predictability in the spheres of public political and economic decision making. Examples drawn from the US Congress are used to exhibit the ways in which rules arise, change endogenously, and are sometimes even violated.

Nobel Laureate Elinor Ostrom revisits and further articulates her lifelong dedication to the study of the problem of the management of Common Pool Resources.

Sebastian Galiani and Ernesto Schargrodsky study the causal effects of property rights. Douglass North’s research has shown the importance of the institutional dimension in the process of economic development. Among the institutions that foster growth, the enforcement of property rights appears most prominently. Land rights are particularly important in the process of economic development. Relaying on a unique natural experiment on land titling in the outskirts of Buenos Aires, Argentina, Galiani and Schargrodsky review the effects of titling the poor on their physical and human capital investments, household decisions, access to credit, earnings and beliefs.

Gillian Hadfield and Barry Weingast, highlight the influence Douglass North had on the emerging field of research of law and society.

Joel Mokyr addresses the issue of culture, institutions and economic growth. Following on the work of North in Understanding the Process of Economic Change, Mokyr examines the role of innovative grand ideas and the ‘intellectual entrepreneurs’ that help spread them, in the evolution of culture, suggesting ways in which we can understand cultural change and how it affects the economy.

Steven Pincus and James Robinson revisit a key debate in economic history. The Glorious Revolution of 1688-89 is one of the most famous instances of institutional change. Pincus and Robinson argue that the institutional change that followed happened for reasons different from those put forward by North and Weingast. It is shown that rather than being an instance of a de jure ‘re-writing the rules’, as North and Weingast argued, the Glorious Revolution was actually an interlinked series of de facto institutional changes which came from a change in the balance of power and authority and was part of a broader reorientation in the political equilibrium of England.

Scott Gehlbach and Edmund Malesky address the issue of institutional change in Eastern Europe and the former Soviet Union. Their paper traces the evolution of the literature on this topic, showing how the study of transition has responded and contributed to our understanding of the emergence and evolution of key political and economic institutions.

Pamela Jakiela, and Pedro Dal Bo close the volume with two examples of the imprints of North’s legacy on the field of experimental social sciences. Jakiela investigates informal institutions, specifically, with moral preferences at the heart of her research in experimental economics while Dal Bo applies the tools of experimental economics to the study of formal institutions. His paper reviews part of the extensive experimental literature on the workings of democratic institutions.

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