This paper is fashioned to present a summary of Douglas North’s Noble Lecture “Economic Performance Through Time”. North is an Economist known for he research on economic history which he rewarded the Nobel Memorial Prize in Economic Sciences. His article is divided into seven sections.
The first section is the introduction, which states that we need an effective analytical framework through which we can study performance of economies over time so that we can better understand economic change. North also states that neo-classical economic theory, fails to recognize that “institutions” and “time” matters in the analysis of economic performance. In addition, the relationship between institutions and incentives decides economic performance. Influenced heavily by learning over time, a culture makes choices, and these choices are passed on through the generations. This essay will help guide us in the “ongoing task of improving the performance of economies”, by providing a base of an analytical framework that will be “capable of increasing our understanding of the historical evolution of economies”.
The second section is a summary of his work done on the nature of institutions and their impact they have on economic performance. We find in this section that institutions are made up of formal, (rules, laws, constitutions) informal constraints (norms and behaviors and self made codes of conduct) and enforcement characteristics (size, weight, and color). These three essentials create incentives for societies and their economies. Institutions and technology connections determine transaction costs that add into production costs. However, North implies that “ the informational and institutional requirements necessary to achieve such efficient markets are stringent”. That rational analysis says that surviving “players’” will lead to correct models based on those that have the best information. In the discipline of the competitive market model entails that...
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