Understanding the Process of Economic Change (Princeton Economic History of the Western World) | 
| Author: Douglass C. North
Publisher: Princeton University Press
Category: Book
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Avg. Customer Rating:  4 reviews
Sales Rank: 41232
Media: Hardcover
Edition: Revised
Number Of Items: 1
Pages: 208
Shipping Weight (lbs): 1
Dimensions (in): 9.3 x 6.4 x 1.1
ISBN: 0691118051
Dewey Decimal Number: 330.1
EAN: 9780691118055
ASIN: 0691118051
Publication Date: January 3, 2005
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Product Description
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.
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| Customer Reviews:
 Great Thesis, ponderous writing October 6, 2008
Having attended several lectures by Dr. North I know him to be a brilliant man, but not the most engaging communicator.
This book has a small summation of several important ideas of the role of uncertainty and technological change, and how economic actors move to adapt to these. Nothing could be more topical these days. Unfortunately, I find the writing unnecessarily dense and even the simplest issues are treated in a verbose manner. I always love reading Hayek, Friedman, Mandelbrot and so many others; but despite my great interest in the subject reading this book was a chore.
Only for the technical experts or very motivated enthusiasts.
Starts out great but fizzles out December 25, 2006
17 out of 19 found this review helpful
North starts his book out emphasizing the important role played in economic development by the uncertainty of the future that impacts the decision makers whose actions will create technological and institutional change over time.This uncertainty is the uncertainty emphasized by Schumpeter,Keynes,Knight,Ellsberg,and Mandelbrot( or mild risk versus wild risk),as opposed to the risk emphasized by neoclassical economics in the form of the standard deviation of a normal probability distribution.Throughout the book North correctly emphasizes uncertainty and not risk as being the environment in which decision makers make choices that will determine future economic growth and change.Unfortunately,North devotes only one small paragraph on p.13 to this vital distinction(uncertainty versus risk).North needs to have spent much more time and pages carefully covering this distinction since it is crucial to understanding the process of economic change .North needs to provide the reader with at least two chapters devoted to covering the risk versus uncertainty topic.The only readers who will benefit from this book would be readers who have already read the relevant works of Knight ,Keynes,Schumpeter,Ellsberg,and Mandelbrot that deal with this topic.I would recommend that a potential reader first cover chapters 7 and 8 of Knight's 1921 book,Risk,Uncertainty and Profit ,and then read chapter 7 on the business cycle from Schumpeter's 1912 book The Theory of Economic Development.North needs to substantially revise the book .His preliminary chapter on cognitive psychology can be filled out more completely once he has added the chapters on uncertainty and its impact on the irreversible nature of investment in long run,long lived, physical,durable capital goods which is " cast in concrete " and essentially irrevocable.
Lacks the rigor of his previous books October 18, 2006
17 out of 19 found this review helpful
The book's main conjecture can probably be best described backwards: at the end of a number of steps, the political and economic outcomes may be observed. These outcomes are the result of the behavior of a number of relevant actors. Their incentives are structured by the prevailing institutions, which, in North's understanding, consist of formal rules, informal norms, and their enforcement characteristics. Institutions themselves, however, are not exogenously given; they are created by humans who act intentionally. North argues that institutions are created based on the relevant actors' beliefs. If the results of the institutions people create are not as expected, people will update their beliefs--they will learn--and institutional change will continue endlessly. To understand the process of institutional change, then, one must understand how beliefs come into being, receive updating, and form the basis of human action. Such understanding is North's current goal....
North tries to deal with the question by delving into cognitive science. To understand how beliefs are formed and how humans learn, he asserts, we must first understand better how our brains work. Thus, he enters territory where, owing to the academic division of labor, economists are amateurs. However, rather than seriously engaging the relevant issues, he barely scratches the surface. Far from familiarizing the reader with the relevant issues by a thorough survey of recent discussions in cognitive science, he barely mentions two or three competing standpoints and then ends the chapter....
In sum, at the outset of my reading of this book, I hoped to find further substantial progress in the new institutional economics. While reading it, however, I realized that it lacked the rigor of the same author's previous books in this field of research. Instead of offering intriguing new arguments, North repeats questions without offering any real answers.
 Economic Change For the Business Executive November 23, 2005
25 out of 62 found this review helpful
I think everyone interested in general business, economics or business strategy should read this book. For some a topic as big as the one Professor North is tackling here might require thousands of pages and a great deal of analytical complexity.
Most students of economics recognize Nobel Prize winner Douglass North and his work. As a specialized student of management, finance and accounting, I am not qualified to analyze the work in relation to its place in the professional field of economics -- although I understand its intentions and direction. My review rather focuses on the relevance of Professor North's statement in this book as a guide for my students of corporate strategy, business policy, finance and accounting; including as well my many clients in executive positions and the practice of law.
The systems view of economic change provided by Professor North casts light on long-term organizational thinking and helpful to our search for corporate and business strategy models in the increasingly efficient capital market environment revealed by modern financial economics.
More to follow....
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