The Role of Informal Institutions
according to Douglass North
Douglass North is an economic historian, he obtains a Nobel Prize for his study of the role and evolution of institutions.
Definition of institutions
Institutions are defined as human constraints that structure political, economic, and social interactions. These are informal (taboos, customs, traditions, code of conduct) or formal (constitutions, laws, property law) constraints. Added to economic constraints, they determine possible choices, transaction, and production costs, and determine the profitability and feasibility of economic activity.
Role of institutions
North studies the impact of institutions on economic development. Institutions make it possible to increase confidence between economic actors by imposing on them the rules of the game and uniform behavior. They reduce transaction costs by protecting buyers from information asymmetries.
He is interested in trade situations without institutions such as bazaars or caravans, where work has to be done by family members, and the emergence of contracted work which brings the possibility of specialization.
Another distinction is “closed order” where a Lord extracts surplus by privilege as in the Spanish Empire, which can be contrasted by the “open order” as in the economy of American independence, which allows Shumpeterian creative destruction under the protection of inclusive institutions.
According to Douglass North, informal institutions have a preponderant role in the definition and evolution of formal institutions.
Conclusions and perspectives
He published Institutions, a summary of 180 pages of his previous works in 1991. Other authors will resume the theme of institutions as necessary for political, economic, and social development. They play a central role for Acemoglu and Robinson in Why Nations Fail in 2006 and for Fukuyama in The Origin of the Political Order in 2011.
Douglass North left us in 2015. Visible presentations and discussions on YouTube (in English) show an academic who appreciates a discussion followed by a glass of wine. He talks about the superiority of democratic institutions and development possibilities for the Third World in the presumptive framework of a discussion between American economists in 2000, but he said that he is not convinced that democratic institutions are stable.
Regarding the stability of democracies, he could refer to the criticism of Mancur Olson in the 1990s concerning the capture by special interests which guides the evolution of institutions in the 20th century. John Darwin's 2008 work “After Tamerlane” shows that the evolution toward more inclusive institutions for Europeans in the 18th and 19th centuries during the colonization of the United States, Canada, and Australia was done as part of a productivity race against China, India, Iran, and the Ottoman Empire.
The race for inclusiveness led to social democracy between 1880 with the emergence of the Mahanian hegemony of the United States and 1918 with their domination of Europe. Once democratic, the nation-states face a more chaotic governance situation. The social choice between socialism and liberalism depends on determinants of social capital such as ethnic homogeneity, education, pre-existing institutions. The work of Djankov and Schleifer on the inclusiveness of labor law illustrates the question of the impact of judicial institutions set up 100 years earlier. The work of Algan, Cahuc and Sangnier compares the social capital between different countries and its impact on taxation.
i read After Tamerlan conclusions. Personally i can add that Timur, Safevi, Mamluk empires short lived becuz Ottoman Sultans personally chosen to crusade south and east part which are dense Turkic tribe populations. The religious Caliph mania started, wanted to be the Holy leader of Muslims, religious leaders are imported and integrated from Arabic lands. If you were arabic ''kavmi necip = superiour race'' in the governance and society of Ottomans. Laws, courts dictated by arab religion leaders ''Kadı''
So this is superior democratic governance, trade, state governance, religious and court leaders were non Turks, you can equal to Usa population. Soldiers and farmers were Turks.
Tax, military obligations for farmers, non Turks untaxed.
There were non ''russia'' Before 12th century. Similarly most of the russia hinterland population densely Turkic tribes but governed by Moscow minority. Same model as Ottoman empire. Tatars are Turkic tribes, no segregation. Crimean Tatars were taxing Moscow until 16 century even.
''So nation fails'' Acemoglu observation about Ottoman is totally distortion again.
There was ultra democracy and governance power for minorities. They are in trade, law, property rights, untax, have religion freedom, travel freedom. Altough they dont have military obligation, they were in command position, given rank title ''Pasha'' ''Grand Vezir''.
https://istanbultarihi.ist/668-the-printing-presses-of-istanbul-1453-1839
At year 1920, Turk populations read-write ratio was below %5.
So thousands of books were printed, who read it, who benefited it, which nation failed i would like to ask Acem if i meet him?
Too much democracy, power always abused it seems.
Ottoman internal resistance to change from traditionalist elements (non Turkic minorities ) within the empire came.The Waging wars for loot become unsuccesful due to population shrink of Turk origins.
Nowadays we see the same pattern in Russia. In Ukraine war, Moscow slavic ones stay and continue their daily life, while Tatars, Bashkurts ,Kazak, Ozbek =Turkic tribes fight and die at war. So Tatars and cechens also fight in Ukraine troops. Slavic young population already fled to EU and Turkey.
Russia is the new Ottoman Empire it seems. History repeats. Foxes who sacrifies their lions, will be eaten by other lions.