Episode 27:
Institutions and Economic Development
1993 Nobel Memorial Prize in Economics laureate Douglass
C. North speaks on the formation of human societies.
Restricted social orders continue to be the norm in
most of the contemporary world. These limited access
societies are ruled by elites through monopolies or
rents. These coalitions are based on personal ties,
hence he calls such societies “natural”
states. However, a number of countries have developed
into open access societies where competition in economic
and political markets, instead of rent-creation, sustains
civil order.
The challenge therefore is how to transit from a
limited access society into an open access one. He
explains that the answer is not deliberately imposing
the characteristics of a free society on a restricted
one. What is needed is to encourage a limited access
society towards maturity by working within the constraints
of its cultural heritage, informal norms and belief
systems.
Read more on the natural state here.
The music is provided by Dieter
Bachmann.
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