Institutional Change--SSP Chart of North transaction cost cases
Situation -------------------------Structure ------------------------------------Performance
| All kinds of
interdependencies-mainly
IUG pre-industrial.
Trans. Cost. Path dependence-Cumulative Causation |
Constitutional rules for
making workaday rules.
Perception (subjective
models) of unrealizable
opportunities so individuals &
organizations try to change
institutions.
1. England: Parliament 2. Spain: Centralized bureau- racy. New business class not represented. (Spanish colonial heritage?) |
1. Magna Carta
Merchant fairs; enclosures; freemen in cities; peasants got right to traditional rents; court enforcement of contract; Mill Dams act destroyed agrarian interests-- "Lowered the cost of acting on one's ideas" for mill dams; Joint-stock co.& capital mobility and debt; patent law; insurance to spread risk. Which are productive and which rent seeking?
2. Feudal aristocrats maintained rights vis a vis peasants and business. |
| Rules which apply to a class are HEC within the class. | Organizations | Try to overcome free riders. |
| Cost of protecting rights | 1. England-King gave rights
in exchange for finance.
2. Spain- confiscated existing property to pay state expenses. |
1. More investment and faster
growth.
2. Less investment and slower growth. |
North- "Stories of stability and change go to the heart of the puzzle about the human economic condition." 130
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