Institutions, Economic Performance and the Visible Hand

Institutions, Economic Performance and the Visible Hand

Theory and Evidence

Ashok Chakravarti

The book challenges the conventional wisdom on the determinants of economic performance and provides an alternative vision of the functioning of an economic system. The author provides a structured survey which critically evaluates the theory and evidence of neoclassical approaches to growth and development. He then skillfully integrates insights from the old and new institutional economics into an original and comprehensive vision of the relationship between institutions, growth and economic development.

Chapter 7: Discontinuous Institutional Change

Ashok Chakravarti

Subjects: development studies, development economics, economics and finance, development economics, institutional economics

Extract

The economic history of the non-Western world shows that outside Japan sustained economic growth over a long period of time, as occurred in Europe and its offshoots such as the United States, Canada and Australia, is a very recent phenomenon. Based on the theoretical, empirical and historical evidence presented in earlier chapters, we argue that this indicates that in these regions there was no historical development of the institutions that underpin modern economic growth. The necessary institutions did not emerge incrementally or spontaneously, in response to endogenous forces, as occurred in Europe. Nevertheless some successful institutions seem to have occurred in Asia and Africa. It is therefore of relevance to this book to consider some case studies and attempt to understand the manner in which these transitions occurred and whether the forces that underlay this change conformed to the West European model, as discussed in Chapter 6, or not. To explain the non-emergence of beneficent institutions in the developing world, we shall use the conceptual framework elaborated on by North, Wallis and Weingast (2009) to explain institutional development in general. They argue that contrary to the traditionally held view about primitive man, recent anthropological literature indicates that primitive societies were extremely violent (Keeley 1996, Otterbien 1989). Keeley (1996: 16) gives examples of the Yanomamo tribe of Venezuela and Brazil, who were constantly embroiled in warfare, and whose men displayed a great propensity to perpetrate violence against everyone. Similarly, the Kung San or Bushmen of the Kalahari, who are portrayed as...

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