Cover

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Frontmatter

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Contents

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pp. vii-viii

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Introduction: Opportunities Lost

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pp. 1-6

In the last two and a half centuries, a scientific and technological revolution has created astounding opportunities for humanity, but the benefits have accrued primarily to people in the industrial countries.The majority of the human race lives in the so-called developing countries that enjoyed few of these opportunities ...

PART I. Imperfect Institutions—Theory

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Chapter 1. Imperfect Institutions and Growth Theory in Modern Economics

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pp. 9-22

In this study, economic growth is the dependent variable of primary interest, but that is not the whole story because my chief concern is with the social causes of economic failure—in particular, with the role of institutions in the pathology of economic stagnation and decline. In medicine, pathology is a discipline that studies the nature of diseases,...

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Chapter 2. Barriers to Growth: Institutions and Social Technologies

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pp. 23-33

New growth theorists and other scholars sometimes claim that they have taken the first step toward a general theory of economic systems, yet a satisfactory general theory has not emerged. Lacking a unified theory of economic systems—one that explains how diverse economic systems operate, how they are nested in a wider social system, and how...

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Chapter 3. Competing Social Models

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pp. 34-46

Rational-choice analysis rarely appeals to uncertainty about social models and social technologies to explain institutional change. Instead, rational choice emphasizes redistribution. Actors may lack data (but often know the probability density functions) for particular variables, but the analysis typically assumes that they understand the ...

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Chapter 4. Stable Poverty and Unstable Growth

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pp. 47-58

This study refers to social institutions as “imperfect” when they are thought to cause relative economic backwardness of economic units,large or small. This chapter considers two aspects of imperfect institutions, stability and fragility—the stability of dysfunctional institutions and the fragility of growth-promoting institutions. First, I discuss how...

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Chapter 5. The Political Logic of Bad Economics

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pp. 59-73

Social scientists seldom explore simultaneously all dimensions of a large research question. Instead, researchers bring available tools to manageable aspects of the problem. One aspect of imperfect institutions that is well suited for standard rational-choice analysis is the question of why rational rulers support policies that are known to...

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Chapter 6. Inefficient Social Norms

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pp. 74-96

A research program that identifies institutions as a crucial determinant included in nearly all definitions of social institutions. Indeed, the literature has paid increasing attention to this complex phenomenon. North (1990) explores the links among ideas, institutions, and economic performance; Greif (1994, forthcoming) analyzes how informal social structures of individualist and collectivist societies affect economic ...

PART II. Empirical Interlude: Poverty Trap—A Case Study

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Chapter 7. Why Iceland Starved

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pp. 99-124

This chapter reflects on the dismal equilibrium that held the Icelandic economy at low or even declining levels of income and technology from the late Middle Ages until the nineteenth century. With the Icelandic case, I hope to bring to life some of the main themes of the book’s theoretical section concerning imperfect institutions and...

PART III. Institutional Policy

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Chapter 8. Applying Social Technologies: Lessons from the Old Theory of Economic Policy

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pp. 127-137

In the 1980s, after decades of neglect, academic economists rediscovered that social institutions matter and that useful ways of analyzing them could be found. In part I of this book, I introduced some of the theoretical vistas that the new institutional economics has opened up. I am particularly interested in what we have learned about imperfect...

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Chapter 9. Degrees of Freedom in Institutional Reform

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pp. 138-151

In this chapter, I look at three basic issues in institutional policy. In the second section, I argue that the concept of optimal regime or optimal economic system (see chapter 8) is too elusive to be of practical use. In neoclassical economics, however, it is customary to define inefficiency as deviation from an optimal state, such as perfect competition. The...

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Chapter 10. Eluding Poverty Traps, Escaping History

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pp. 152-173

As we saw in chapter 1, modern growth theory pinpoints world knowledge as the primary source of economic growth. According to new or endogenous growth theory, leading countries forge ahead by developing and applying new production technologies, and growth laggards fall behind because they are unable to adopt and apply knowledge that...

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Chapter 11. Minimal Property Rights and Legal Transplants

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pp. 174-190

Assuming that the reform measures have already passed through the formal political process, we focus here on problems with implementation. The question of failed reform is examined in the context of legal transplants. The transfer of legal institutions between countries has had mixed success, indicating that production technologies travel better than ...

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Conclusion: The Subtle Art of Major Institutional Reform

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pp. 191-202

The new institutional economics has made good progress in analyzing the role of institutions in shaping economic outcomes, but the field has made less headway formulating clear principles of institutional policy in many crucial areas.1 Throughout the world, reformers, convinced that institutions matter for growth, increasingly seek ways to improve...

Notes

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pp. 203-242

Bibliography

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pp. 233-254

Author Index

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pp. 255-260

Subject Index

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pp. 261-264