Comment on Douglass C. North

Abstract

By drawing on a larger study of his, Professor North has provided an account which covers a millennium of European History. By employing telling examples, he tries to demonstrate that changes in institutional structures and complementary beliefs or “ideologies” guiding human choices and actions are the ultimate sources of economic development and not the territorial factor endowments and technologies (all theoretical refinements included) to which conventional economists tend to ascribe economic growth. I accept the argument that economic theory cannot explain why growth has not become universal if the standard assumption holds that the desire for improvement is a universal human trait and that investment in skills and technologies can solve the problem. But I doubt that institutions and complementary beliefs alone can explain why “societies have failed to make the ‘proper’ investments”. If institutions and beliefs are not supposed to represent kinds of residual variables, explanatory gaps most probably remain. Attempts to close these gaps systematically would have to include, for example, collective decision making. It may help to explain why less productive institutions were set and enforced by authorities. Regarding the historical evidence provided by Professor North, I must leave the scrutiny to the experts. In my further comments I like to extend his reasoning with regard to a general topic of this conference, i.e. institutional competition (IC)¹⁴ before finishing with an unsettled question.