Understanding the Process of Economic Change by Douglass C. NorthUnderstanding the Process of Economic Change by Douglass C. North

Understanding the Process of Economic Change

byDouglass C. North

Paperback | May 9, 2010

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In this landmark work, a Nobel Prize-winning economist develops a new way of understanding the process by which economies change. Douglass North inspired a revolution in economic history a generation ago by demonstrating that economic performance is determined largely by the kind and quality of institutions that support markets. As he showed in two now classic books that inspired the New Institutional Economics (today a subfield of economics), property rights and transaction costs are fundamental determinants. Here, North explains how different societies arrive at the institutional infrastructure that greatly determines their economic trajectories.


North argues that economic change depends largely on "adaptive efficiency," a society's effectiveness in creating institutions that are productive, stable, fair, and broadly accepted--and, importantly, flexible enough to be changed or replaced in response to political and economic feedback. While adhering to his earlier definition of institutions as the formal and informal rules that constrain human economic behavior, he extends his analysis to explore the deeper determinants of how these rules evolve and how economies change. Drawing on recent work by psychologists, he identifies intentionality as the crucial variable and proceeds to demonstrate how intentionality emerges as the product of social learning and how it then shapes the economy's institutional foundations and thus its capacity to adapt to changing circumstances.



Understanding the Process of Economic Change accounts not only for past institutional change but also for the diverse performance of present-day economies. This major work is therefore also an essential guide to improving the performance of developing countries.

Douglass C. North is professor of economics and Spencer T. Olin Professor in Arts and Sciences at Washington University in St. Louis. He was the corecipient of the Nobel Prize in Economic Sciences in 1993.
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Title:Understanding the Process of Economic ChangeFormat:PaperbackDimensions:200 pagesPublished:May 9, 2010Publisher:Princeton University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0691145954

ISBN - 13:9780691145952

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Table of Contents

Preface vii

CHAPTER ONE: An Outline of the Process of Economic Change 1





PART I: THE ISSUES INVOLVED IN UNDERSTANDING ECONOMIC CHANGE 9

INTRODUCTION 11

CHAPTER TWO: Uncertainty in a Non-ergodic World 13

CHAPTER THREE: Belief Systems, Culture, and Cognitive Science 23

CHAPTER FOUR: Consciousness and Human Intentionality 38

CHAPTER FIVE: The Scaffolds Humans Erect 48

CHAPTER SIX: Taking Stock 65





PART II: THE ROAD AHEAD 81

INTRODUCTION 83

CHAPTER SEVEN: The Evolving Human Environment 87

CHAPTER EIGHT: The Sources of Order and Disorder 103

CHAPTER NINE: Getting It Right and Getting It Wrong 116

CHAPTER TEN: The Rise of the Western World 127

CHAPTER ELEVEN: The Rise and Fall of the Soviet Union 146

CHAPTER TWELVE: Improving Economic Performance 155

CHAPTER THIRTEEN: Where Are We Going? 166





Bibliography 171

Index 183


Editorial Reviews

"This deeply exciting book culminates North's research agenda, and points the way to solving the most valuable but intractable problem in economics today: how institutions evolve. When I first read it I immediately saw implications for my own research, and began rethinking several fundamental ideas about how economies and their governments interrelate. What you learn from North changes how you think, and changing how people think is the best measure of intellectual influence."-John Joseph Wallis, University of Maryland