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Understanding the Process of Economic Change
Douglass C. North

Paperback | 2010 | $29.95 | £24.95 | ISBN: 9780691145952
200 pp. | 6 x 9 1/4 | 12 line illus. 1 table.
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In this landmark work, a Nobel Prize-winning economist develops a new way of understanding the process by which economies change. Douglass North inspired a revolution in economic history a generation ago by demonstrating that economic performance is determined largely by the kind and quality of institutions that support markets. As he showed in two now classic books that inspired the New Institutional Economics (today a subfield of economics), property rights and transaction costs are fundamental determinants. Here, North explains how different societies arrive at the institutional infrastructure that greatly determines their economic trajectories.

North argues that economic change depends largely on "adaptive efficiency," a society's effectiveness in creating institutions that are productive, stable, fair, and broadly accepted--and, importantly, flexible enough to be changed or replaced in response to political and economic feedback. While adhering to his earlier definition of institutions as the formal and informal rules that constrain human economic behavior, he extends his analysis to explore the deeper determinants of how these rules evolve and how economies change. Drawing on recent work by psychologists, he identifies intentionality as the crucial variable and proceeds to demonstrate how intentionality emerges as the product of social learning and how it then shapes the economy's institutional foundations and thus its capacity to adapt to changing circumstances.

Understanding the Process of Economic Change accounts not only for past institutional change but also for the diverse performance of present-day economies. This major work is therefore also an essential guide to improving the performance of developing countries.


"Anyone with an interest in world poverty can benefit from this carefully crafted and closely argued book. It is a pleasure and a delight to read."--Paul Ormerod, Times Higher Education

"[North] sets forth a radical reconceptualization of the task and methods of the social sciences in general and economics in particular, providing a glimpse at an economics that refuses to 'assume a can opener.'"--Will Wilkinson, Cato Journal

"[This book] provides a sweeping view of the relationships among human belief systems, social institutions, and what [North] calls 'the adaptive efficiency' of societies in coping with changes in demographics, technology, and other factors."--Richard N. Cooper, Foreign Affairs

"A courageous attempt to enlarge the arsenal of theoretical tools available for economists."--Diego Rios, Journal of Evolutionary Economics


"Just as Douglass North's earlier classic, Institutions and Institutional Change, ushered in the revolution in understanding institutions that dominated the nineties, his new book, Understanding the Process of Economic Change, seeks an equally revolutionary change. North now integrates the cognitive component into this analysis: how the mind works, how we form beliefs and understandings about the world, and how societies solve--or fail to solve--the problems they face. This book is vintage North."--Barry Weingast, Professor of Political Science, Stanford University

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Table of Contents:

Preface vii
CHAPTER ONE: An Outline of the Process of Economic Change 1

CHAPTER TWO: Uncertainty in a Non-ergodic World 13
CHAPTER THREE: Belief Systems, Culture, and Cognitive Science 23
CHAPTER FOUR: Consciousness and Human Intentionality 38
CHAPTER FIVE: The Scaffolds Humans Erect 48
CHAPTER SIX: Taking Stock 65

CHAPTER SEVEN: The Evolving Human Environment 87
CHAPTER EIGHT: The Sources of Order and Disorder 103
CHAPTER NINE: Getting It Right and Getting It Wrong 116
CHAPTER TEN: The Rise of the Western World 127
CHAPTER ELEVEN: The Rise and Fall of the Soviet Union 146
CHAPTER TWELVE: Improving Economic Performance 155
CHAPTER THIRTEEN: Where Are We Going? 166

Bibliography 171
Index 183

This book has been translated into:

  • French
  • Chinese (Simplified)
  • Swedish
  • Spanish
  • Italian
  • Russian


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