Updated: November 27, 2015 12:13:03 am
With the passing of Douglass C. North Monday night, the world lost one of the great economists of the last century. Doug was known for his intense curiosity and relentless, even mischievous, pursuit of new ideas. He was never satisfied with his ideas. He would say he was dumb, that he had to mull things over and over again. In truth, he was a visionary. He would say he was sure that a particular idea was relevant to the question we had posed. I’d ask why, he’d say he didn’t know. But three months later it would be obvious.
Most academics are lucky if they participate in one revolution. Doug was at the forefront of several. His first book, The Economic Growth of the United States, 1790-1860 (1960), helped foster the revolution that came to be known as the “new economic history”, the application of frontier economics to study the problems of the past. He and Robert Fogel were awarded the Nobel Prize in economics (1993) largely for their leadership in this new research programme. But Doug understood that the neoclassical economics on which he was raised was inadequate to address the problems he sought to answer, namely, why a few countries are rich while most remain poor, some in dire poverty. Much of his best work addressed this question.
With Robert Thomas, he wrote The Rise of the Western World (1973), which began his exploration of the role of rights and institutions in the political-economics of development. Arguably his best book, Structure and Change in Economic History (1981), dug deeper into the problem of development, providing the beginning of the Northian approach to understanding institutions. Institutions, Institutional Change, and Economic Performance (1990) represents the culmination of this research path and remains the premier statement of the profound role played by institutions in economic, political and social realms of action. Twenty-five years later, economists, political scientists and sociologists continue to mine this rich line of research.
The next research turn went to the heart of human action, focusing on the limits of economists’ assumption of rational choice. In Understanding the Process of Economic Change (2005), Doug drew on recent developments in cognitive science to expand our understanding of human choice and action. His last book, co-authored with John Wallis and myself, developed a new approach to thinking about the problem of development. Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (2009) highlights the role of violence. I will leave it to others to evaluate its merits.
North’s approach has had practical implications for development. At a time when economists and the international community focused almost exclusively on markets, Doug knew this wasn’t enough. Instead, he emphasised that institutions were needed to enforce property rights and contracts, and to freely form organisations to compete. Most important was the need to create a hospitable political environment for markets, one free from government expropriation and predation. North explained it was not just about promulgating the right laws and regulations. Institutions that created incentives for officials to abide by these rules were also necessary. The best laws administered by a corrupt system were of little help. This approach, including the now common phrase “good governance”, is standard today. But it was on the fringe in the 1980s and early ’90s.
I have many personal memories of Doug. In the late 1980s, we completed our first paper, “Constitutions and Commitment: The Evolution of the Institutions of Governing Public Choice in 17th Century England”. We proposed a new approach to thinking about how successful constitutions secure the role of government in promoting long-term economic growth. Not a fan of the growing mathematisation of economics, Doug told me when he arrived at Stanford in 1987 that he didn’t like all the game theory, but wanted to learn more. He and I met with Paul Milgrom. Paul impressed Doug, not only for his brilliance, but for his attitude about economics and research more generally. In discussing the role of mathematics in economics, Paul said, “First we get the economics right, then we build the models.” Doug and I were seduced into a collaboration that produced a joint paper. This Thanksgiving, I’ll give thanks for the many years I enjoyed his friendship.
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