Institutional Change: Path from Absolute Monarchy to Parliamentary Supremacy


            Situation                              Structure                                               Performance

All kinds of interdependencies–mainly IUG pre-industrial goods, land.

Trans. Cost of persons who accept role of buyer.


Path dependence–Cumulative Causation.  Increasing returns to existing institutions. P. 115


Uncertainty–visions of the future.

Wool trade, both countries:

Change in relative prices.

Change in tastes.


Everyday rule, Time 1

King confiscated property at will in both England and Spain.



Rules for making everyday rules:


Culture, individualsim



Glorious Revolution 1688

(North p. 138-9)

Constitutional rules for making workaday rules.  Perception (subjective models) of unrealizable opportunities so individuals & organizations try to change institutions.

1. England: Parliament




    Ideology: learning


(impact in next period will be secure property rights)


2. Spain: Centralized bureau-

racy.  New business class not represented. No willpower. (Spanish colonial heritage in Latin America?)

1. Magna Carta. 1215 Becomes structure in next period.


England- Kings Edward I & III gave rights in exchange for war finance 1327-1377


Parliamentary supremacy.


1. 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 spread risks. Banks.

Which are productive and which rent seeking?


2. Feudal aristocrats maintained rights vis a vis peasants and business.

Time 2.

Rules which apply to a class are HEC within the class.

Organizations, emotion.


Try to overcome free riders in lobbying to change laws.




U.S. frontier settlements. IUG        U.S. Northwest Ordinance            Court decisions on public interest in navigable water & high water mark.


North– “Stories of stability and change go to the heart of the puzzle about the human economic condition.” 130    North is modest about what he can predict because of randomness in human perception of possibilities.