The Importance of Institutions (Brief)
The power of institutions illustrated. But what causes institutions? Can we change institutions?
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First of all thanks to professors. These courses are the only free lunch that we can enjoy. My question is why freedom is not included as important factor to economic development?.Winner of the Nobel Prize in Economics Amartya Sen in his book ' development as freedom" gave more explanation about the role of freedom in economic development, how we can include that work in our debates on institutions and economic development?. Your advice.
Thanks! Keep in mind that this is only an introductory video. We cover lots of factors in economic development and further lectures look at rule of law, property rights, corruption/honest government and other components of freedom. We also look at factors such as geography which are prior to freedom but which may impact institutions and have a long-run influence on freedom.
Why are there subtitles on this video when my profile says "not necessary" and I saw no subtitles on the first and third videos in the course? (I ask because I find the subtitles disruptive and strongly prefer to do without.)
You may have turned the captions on accidentally. Move the cursor near the bottom of the video, click CC and then look for turn captions off. Most of the videos have rough (machine translated) English captions. Quite a few have good Spanish translations. In the future we will be looking for help to caption all the videos in many languages. Whether you see the captions, however, is entirely under viewer control and not controlled at all by your profile which is just used to gather information.
Why culture is not considered an institution? I would consider culture an institution itself which can further shape the development of other institutions.
The definition of "culture" is often a function of the specific social domain, eg. one can argue about the characterization of national culture, regional culture, organizational culture, corporate culture, etc. The meaning of "culture" cannot be defined as precisely as the meaning of "institution". In very broad terms, an institution can be defined by a set of rules formally and mutually agreed among the members of a community.
Having said that, I agree 100% with the notion that culture (in its various declinations) can and indeed does contribute to the choice of development path of a community. The thing is that culture, in contrast to institutions, cannot be managed by the community as easily as institutions can.
Out of curiosity I googled the town in the photo, Nogales, and found this article by Paul Theoroux about a recent visit to the Mexican side of the border - its an interesting article with some good information about the economics of the town.
What is the purpose of that particular picture of Nogales? It doesn't support the dubious points made in the video. The infrastructure on both sides is the same, the police are casually ignoring official rules by parking on the sidewalk on the North side, the North is dominated by nasty modern architecture block government and institutional buildings while the South has attractive traditional architecture. There is more commerce and more motor vehicle presence on the South side with more orderly traffic and pretty homes with views on the hillside.
I thought the same - that picture could be better. It does not reinforce the points made through the statistics that the reader presents
Yet the points you make are not necessarily evidence of the well being of the general population in the two areas. In fact, mansions tend to be evidence of disparities in income, not general welfare.
If you travel to Nogales (Az and Sonora), and if you talk to people about living in the two cities, you will quickly come to be convinced that the basic point of the video is absolutely correct. Unless corruption, uncertainty and general chaos are your personal cup of tea, Nogales, AZ is, by far, the more attractive community in which to live. The persuasiveness of the photo as evidence is, I suppose open to interpretation.
Is there a more objective measure of the reliability of institutions other than surveys of public perception of reliability? I ask this because is seems plausible to me that part of the reason democratic republics are more stable than autocratic republics, which in turn are more stable than dictatorships, is the fact that policies just can't change that quickly. I'm a newbie at economics, any research or help would be greatly appreciated.
I wonder if North Korea's situation is exaggerated by the, shall we say, idiosyncratic personality of its longtime dictator Kim Il-Sung. Given the widespread bread lines in the old Soviet Union, I'm sure North Korea would still be behind South Korea, but without a ruler who only cares about his handpicked sycophants gathered in the national capital, there would probably be a few more cities lit up at night.
Kevin, I see what you are saying, but I think there is a reasonable definition of "institutions" that might include the fact that sometimes the personality type of the totalitarian ruler is .... idiosyncratic. It seems reasonable to assume that even a staunch defender of totalitarian institutions would acknowledge the importance of choosing the right rulers and the potential for wrong choices as a major downside to that governing arrangement.
Another aspect of the research, specifically Acemoglu and Robinson, is that much of what you consider idiosyncratic behavior isn't. In order to maintain despotic control in the modern era, one has to both hobble mass society and aggrandize central power. The institutions that are in place serve to extract wealth from the general population, if there is way to do well for oneself without joining the oppressive class, one won't be beholden to the ruling class. So when marginal degrees of liberation take place the risk is that individuals will see the system for what it is, and that system will become unsustainable very quickly. Once the genie is out of the bottle_ the traditional ruling class can only maintain control through violence or by temporarily placating the masses with brighter economic prospects or further amounts of political freedom. The Arab Spring and its many sprouts provide excellent examples of each of these scenarios. In Egypt, you saw violence initially and then the gradual erosion of power, as new demands from the population were made and met. Oman, Jordan, Saudi Arabia, and a few of the more stable gulf states generally took the route of providing greater economic benefits to the population, In Syria and Libya, the government fully committed to military solutions. Don't get me wrong, I know each of these countries have very different economic and political institutions, but none of these countries at the time could be considered democratic, and all of them contain/ed extractive institutions.
Hello, your practice questions here seem to want us to say that Institutional differences are possibly explained by History and Geography. Yet the whole short analysis of this video focussed on 2 parts of the world (Nth and Sth Korea, USA and Mexico) that have essentially the same geography but have different histories, and that the border separating the two shows how little geography plays a part and how much history does.
In terms of vital statistics of an economy - i.e GDP, GNP, Trade etc. South Korea and USA maybe doing better than DPRK and Mexico, but what are the tradeoffs a country would have to face, for achieving a lively economic growth ?
It's true that institutions make a massive difference in the development of economies. Could you provide examples that aren't quite so tied to American propaganda? The descriptions regarding North and South Korea "choosing" communism and capitialism, respectively, are woefully simplistic. As someone interested in studying comparative economic policies that run the gamut, it concerns me that both examples scream "American capitalism is the best" when there are countless other examples of both American-style institutional failures and other styles' institutional successes.
Just a couple of verbal typos in the Arizona/Mexico video... Maybe the little graphic indicating "higher income" should be on the right, not the left, and the audio several times does the same thing -- claiming all the good stuff on the "left".
Hello. First of all, as it is my first answer, I would like to say thanks for the courses.
Going to the point. I understand the importance of institutions, but i think that it's more important that politicians respect institutions and work for the people. Do you think that the non respect of institutions it's a general problem ?
I know this is an introductory course but I would like to see you take on the arguments of Why Nations Fail, which attempts to dispose at least of the geography argument, and provides a more nuanced view of the part that history and institutions play in development. Similarly, I would like to see upfront a discussion of why, say, Switzerland might be richer in GDP than France or Germany, its neighbors with similar culture, or the differences between U.S. living standards today and 50 years ago. One measure might be purchasing power adjusted for inflation. I'm guessing the answers might be more difficult to draw out than in Nogales, but it can't just be because of Switzerland's power to attract foreign money that needs a safe haven. Otherwise the Swiss would not necessarily benefit from this and the banks are notoriously bad at encouraging individuals to take risks in business, whatever they may be doing on their own (the UBS and Credit Suisse scandals). As for the US you might look at health care costs and distribution as an indicator of wellbeing and development. My basic point, I guess, is that even introductory texts should point us to fruitful puzzles rather than offer simplified models for the sake of a quick point. Remember Einstein: Be as simple as possible but not more so. Nevertheless congratulations on trying to make the subject accessible to a broad subject, and perhaps teach Americans who are otherwise blithely ignorant of foreign realities that the U.S. can help others with international aid that does not involve arms (moving the country off a permanent war footing, I think someone said recently) or protection for commercial interests.
Paul Romer, in teh TED talk you link to, talks not just of North and South Korea contrasting authoritarianism with "free markets" but also of Haiti as a place where too little government has led to disaster. If you decide to expand this brief lesson, you might consider including both sides of the issue of "institutions" (these terms are all suspect, and Romer prefers rules, while admitting that he really means norms and values rather than simply regulations).
Very simplistic world view where "communism" leads to "bad things" and "capitalism" to "good things". It will be interesting to follow if you will put special emphasis on how the South Korean government set up the rules for the expansion of the market in South Korea. Their success was not a free market success, far from it.
It is also interesting how you see greater consumerism as something good, or that having an economy which produces so much light as seen from the space is something implicitly good, not counting light pollution. An economistic and materialistic view on things is, for me, a flawed and incomplete way of looking at the state of the world.
The problem to include "ethical" argument in economic issues is that there are as many ethics as human beings and discussions turn circular and eternal. I think that development economy refers to improve the material wellbeing of people. with as minimal of personal values as possible. A good economy is those where people is richer in material goods and vice versa. I am not meaning that values are not important, but they are personal, as religion, political preferences and so on so there are no room for an nearly objective approach to those issues. In terms of economic development South Korea is more successful than North Korea and I guess that if someone disagree, is perfect but he is not talking about economy or development but on political preferences, which is not the topic.
The experience of south Korea indicates the effective role that the government can play in promoting economic prosperity and growth. South korea efficiently utilized the principles of specialization and division of labour.The opening up of the Korean market to international corporations was a key element in gaining new technology, experince and know -How.
It is the market econnomy that led to economic mircles in South Korea. This kinds of economies referred to as mixed economies.Nobel laureates in economics Joseph Stiglitz in his book ( globalization and its discontents ) gives more explanations on these issues.This is my own opinion.