The Great Economists Douglas North

What accounts for their widely disparate performance characteristics? This divergence is even more perplexing in terms of standard neoclassical and international trade theory, which implies that over time economies, as they traded goods, services, and productive factors, would gradually converge. Although we do observe some convergence among leading industrial nations that trade with each other, an overwhelming feature of the last ten millennia is that we have evolved into radically different, ethnic, cultural, political, and economic societies, and the gap between rich and poor nations, between developed and underdeveloped nations, is …. North took economics out of its comfort zone… and instead brought in … in order to understand why some countries succeed and others fail.

As wide today as it ever was and perhaps a great deal wider than ever before … Politics, sociology, and history

One of the problems contributing to UK’s economic stagnation and fall

Overfocusing on the financial sector, which benefits London only, misallocation of capital

North believed that institutions …, a key element of economic growth. North found this was common among prosperous economies, such as the UK: “The security of property rights and the development of the public and private capital market were … and ultimate dominance of the World.“

Mattered for technological progress … Instrumental factors not only in England’s subsequent rapid economic development but in its political hegemony

The World Bank assumes that a 3 percent poverty rate is equivalent to the end of poverty since …, perhaps when they lose their jobs. This is known as …. To get to that point would take a heroic effort.

There will be some who move into poverty only temporarily … Frictional poverty

Most people have been lifted out of poverty through .... This is in contrast to Africa, where, as Oxford economist Paul Collier points out, unlike China, income growth has been based on …. It is not possible to count on growth alone to lift the remaining 767 million people out of poverty.

Self-employment and not by exploiting the land and its resources … Natural resources and the gains have not been widely shared

The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think ….

About anything else

First-generation currency crisis refers to …. Countries such as Brazil, Mexico, and Argentina… had traits that made them vulnerable: …, so their governments were borrowing to spend, a …, so they were importing more than they were exporting, and …, so prices were rising fast.

The Latin America crisis of 1981 - 1982 … A large budget deficit … Large trade or current account deficit … High inflation

The twin deficits and high inflation are why

The emerging economies are viewed as vulnerable to growth-derailing crises

The second generation refers to

The collapse of the ERM in 1992

High interest rates create …. This history highlights that the most vulnerable to crises are those …. Richer countries grow more slowly since they have to innovate and upgrade their industries in order to raise their productivity. For China, 4 % growth would be a disappointment; for the USA it would be magnificent.

Expensive borrowing and depressed investment, so worsening growth … Emerging economies with the greatest exposure to foreigners owning their debt

Three reasons that motivate multinational companies and attract investment: ….

Natural resources, lower costs, and new markets

Cultural differences and customs play a pivotal role in the growth of the economy. How societies interact is ….

Crucial in understanding how institutions evolve

Slow productivity growth in particular

Is an issue for Britain

The solution to the economic and political failure of nations today is to ….

Transform their extractive institutions toward inclusive ones

Workers are also

Innovators in growth economics

The stagnation of living standards is attributed to 2 main factors:

Globalization and skill-biased technical change

Domestic policy measures such as redistribution and government spending on skills are more likely to….

Be to address directly growing inequality

More open and competitive markets

Speed up the creative destruction