Understanding the Process of Economic Change; Scarcity, Conflicts, and Cooperation: Essays in the Political and Institutional Economics of Development

In This Review

Understanding the Process of Economic Change

By Douglass C. North
Princeton University Press, 2005
208 pp. $29.95
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Scarcity, Conflicts, and Cooperation: Essays in the Political and Institutional Economics of Development

By Pranab Bardhan
MIT Press, 2004
328 pp. $62.00
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These two books focus on the institutional aspects of economic transformation -- the incentives they create and the adaptations they permit. Historian North's extended essay provides a sweeping view of the relationships among human belief systems, social institutions, and what he calls "the adaptive efficiency" of societies in coping with changes in demographics, technology, and other factors. It contains brief but illuminating chapters on the rise of the West, starting with the Netherlands and England, and on the collapse of the Soviet Union.

Berkeley economist Bardhan focuses on institutional conditions and the incentives they provide to advance or retard economic development. He emphasizes distributional conflicts as an obstacle to social and political changes that would foster economic growth. The book provides a closely reasoned but largely nontechnical review and interpretation of the professional literature on such issues as corruption, credibility of commitments, capture of government by special interests, and sources of ethnic conflict -- especially how ethnic differences are emphasized and enhanced in pursuit of economic interests. These phenomena are all complex. Corruption, for example, can sometimes improve the well-being of a society's poorest members; at other times it can worsen their condition. As usual, the details are all important.