Theory and Evidence
My research agenda over the past ten years has focused on institutions and how the structure of economic and political governance affects economic performance and developmental outcomes. This interest was a direct consequence of my experiences as a development practitioner, mainly in Africa, where I have been managing institutional development programmes on behalf of various aid agencies since 1980. I found that these experiences strongly contradicted the standard economic models and development theories that emerged from these models. Consequently, my initial programme of research focused on the impact of aid on development and culminated in the publication of my first book entitled Aid, Institutions and Development (Edward Elgar 2005). In this study I concluded that the evidence indicated that aid in general has had a very limited impact on development. However, in countries with good economic and political institutions, where good governance and favourable macroeconomic policies are being followed, aid can have a much more significant impact. Standard economic theory postulates that growth and development are a function of technology, and the level of resources – primarily physical and human capital – invested in a society. What I observed in the many countries I worked in was that the institutional framework of a society (i.e. the economic and political rules that govern its functioning) was far more important in determining economic outcomes. That conclusion was reinforced by the events surrounding the recent sub-prime related financial crisis and subsequent world recession. This crisis has shown that even highly developed markets in the advanced...