This is a course in Economic History, with special emphasis on theories of institutional change.

Economic History applies economics to history.  The methods of economics are used to explore historical issues, and historical examples are used to understand the process of economic development.  Obviously, the issue(s) of trade underscores our study of institutional chance.  However, before we take up trade specifically, we will pursue four goals which will lay the groundwork for a more structured discussion. 

First, the course will make you better aware of the historical dynamics that propelled the contemporary economic system to its present position.  Second, the course will illustrate how the main body of economic knowledge can be enriched by the study of institutional change.  Third, it will highlight the importance of markets in the allocation of society’s resources throughout history.  Fourth, examining historical events within a unified methodology enhances the usefulness and power of the approach when directed at current issues.  Among the latter will be the role of trade in development, barriers to trade and others. 

Texts and Materials

There is no formal text.  Reading material is on reserve at the library.

Criteria for Evaluating Teaching and Student Performance

There will be a take home mid-term exam and a take home final over material covered in class.  Both will be overnight take homes.

We will rely on the usual MIIS and CD format for evaluating professor’s performance.

 

Readings

I.  Introduction  

Why are we here?

 

Current Issues

 

Regional and Global Integration

Free Markets and Liberalization Programs.

Productivity and Convergence
      

Nathan, Rosenberg & L.E. Birdzell., How the West Grew Rich, (NY: Basic Books, 1985) pp. 163-165.

How do we approach these? Can we continue to rely solely on neoclassical economics?

Why Not?

What is the alternative?

 

II. Methodological Issues, or, Why Neoclassical Economics is not Enough

The Concept of Economic Efficiency

The Prisoner’s Dilemma

The Problem of The Commons

Nathan, Rosenberg & L.E. Birdzell., How the West Grew Rich, (NY: Basic Books, 1985) pp 3-36, 113-143, 144-188, 242-268, 269-235.

 North, Douglass C., Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press, 1990) Chapter 1.

 Langlois, Richard., “The New Institutional Economics: An Introductory Essay,”  in Richard Langlois, ed., Economics  As  a Process: Essays in the New Institutional Economics (Cambridge: Cambridge University Press, 1986), 1-25.

 North, Douglass C., “Some Fundamental Puzzles in Economic History/Development,”  Washington University, Draft (1995?).

 Kronman, Anthony., “Contract Law and the State of Nature,” Journal of Law, Economics, and Organization Vol. 1, No.1 (Fall 1985) 5-32.

 Williamson, Oliver., “Credible Commitments: Using Hostages to Support Exchange,” American Economic Review  Vol. 73 (1983) 519.

 Olson, Mancur., The Logic of Collective Action (Cambridge, MA: Harvard University Press, 1965) Introduction.

 North, Douglass., Structure and Change in Economic History (NY: Norton, 1991) Chapter 3, A Neoclassical Theory of the State.

II.  The Alternative: The New Institutional Economics

            Precursors

Coase, Ronald., “The Nature of the Firm,”  Economica (November 1937).

Coase, Ronald., “The Problem of Social Cost,” Journal of Law & Economics (October 1960) 1-44.

Schumpeter, Joseph., Capitalism, Socialism and Democracy (NY: Harper & Row, 1942) 59-164.

Hayek, Friedrich., The Counter-Revolution of Science (Liberty Press, 1979), 17-77, 77-182.

A.  Institutions & Transactions Costs

North, Douglass C.,  “Institutions,” Journal of Economic Perspectives   5 (Winter 1991).

North, Douglass C., “Institutions, Ideology and Economic Performance, Cato Journal  Vol. 11 (1992).

North, Douglass C., Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press, 1990) Chapter 4, A Transaction Cost Theory of Exchange.

Williamson, Oliver., “Transaction-Cost Economics: The Governance of Contractual Relations,” Journal of Law and Economics 22 (October 1979) 233-362.  Reprinted in O.E. Williamson, The Economic Institutions of Capitalism (New York: The Free Press, 1985) Chapters 1-3, 13, 15.

Klein, Benjamin, R. Crawford & Armen Alchian., “Vertical Integration, Appropriable Rents, and the Competitive Process,” Journal of Law & Economics  V. 21 (1978) 297-326.

B.  Transactions Costs

Property Right

Libecap, Gary, “Property Rights in Economic History,”  Explorations in Economic History  (July 1986) 227-252.

Alchian, Armen and Harold Demsetz, “The Property Rights Paradigm,”  Journal of Economic History (March 1973) 16-27.

Demsetz, Harold, “Towards a Theory of Property Rights,” American Economic Review  (1967) 347-359.

McManus, John C., "An Economic Analysis of Indian Behavior in the North American Fur Trade,"  Journal of Economic History Vol. 32, No.1 (March, 1967) 36-53.

North, Douglass., Structure and Change in Economic History (NY: Norton, 1991) Chapter 7.

Anderson, Terry L. & D. J. Hill., "The Evolution of Property Rights: A Study of the American West," Journal of Law and Economics  Vol. 18, No.1 (1975) 163-179.

 

C.  The Problem of Collective Action

Olson, Mancur., The Logic of Collective Action (Cambridge, MA: Harvard University Press, 1965).

Hardin, Russell., Collective Action (Baltimore: Johns Hopkins University Press, 1982).

Hardin, Russell., "The Social Evolution of Cooperation," in Karen Schweers Cook and Margaret Levi, eds., The Limits of Rationality (Chicago: University of Chicago Press, 1990).

Taylor, Michael., The Possibility of Cooperation (Cambridge: Cambridge University Press, 1987) Chapter 1, The Problem of Collective Action.

Taylor, Micheal., "Cooperation and Rationality: Notes on the Collective Action Problem and Its Solution," in Karen Schweers Cook and Margaret Levi, eds., The Limits of Rationality (Chicago: University of Chicago Press, 1990).

Axelrod, Robert., The Evolution of Cooperation (NY: Basic Books, 1984) 3-87.

North, Douglass., Structure and Change in Economic History (NY: Norton, 1991) Chapter 5, Ideology and the Free Rider Problem..

The Evolution of Institutions

David, Paul., “Clio and the Economics of QWERTY” AEA Papers and Proceedings (May 1985) 332-337.

Liebowitz, S.J. and Stephen Margolis, “The Fable of the Keys,” Journal of Law & Economics Vol. 33 (April 1990) 1-25.

Lyons, Bruce., "Organizations," in Shaun Hargraves Heap, Martin Hollis, Bruce Lyons, Robert Sugden & Albert Weale, The Theory of Choice: A Critical Guide (Oxford: Basil Blackwell, 1992).

North, Douglass C., Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press, 1990) Chapter 10 and 11..

            Long Distance Trade

Greif, Avner., “Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies,”  Journal of Political Economy Vol. 102, No.5 (1994) 912-950.

 

Development of Merchant Codes of Conduct

 

Milgrom, Paul, Douglass C. North & Barry Weingast., “The Role of Institutions in the Revival of Trade: Law Merchants, Private Judges and The Champagne Fairs,” Economics & Politics Vol. 2 (1990) 1-24.

 

Converting Uncertainty to Risk - the Development of Marine Insurance

 

Bills of Exchange, the Developments of Impersonal Capital Markets and the growth of early banking

 

Overcoming Moral Hazard, Adverse Selection and Agency Problems

Nathan, Rosenberg & L.E. Birdzell., How the West Grew Rich, (NY: Basic Books, 1985) pp. 113-143, 144-188.

 

Current Issues:  Sources of Growth

 

North, Douglass., Structure and Change in Economic History (NY: Norton, 1991) Chapter 13.

Orr, Daniel & Thomas S. Ulen., “The Role of Trust and the Law in Privatization,”  The Quarterly Review of Economics and Finance, Vol. 33, Special Issue, (1993) 135-155.

Bardham, Pranab., “The Nature of Institutional Impediments to Economic Development,”  California at Berkeley, Dept. of Economics WP (March 1996).

            Losing the Competitive Edge

Mancur Olson, The Rise and Decline of Nations: Economic Growth, Stagflation & Social Rigidities (New Haven, CT: Yale University Press, 1982).

Murphy, Kevin, Andrei Schleifer, and Robert W. Vishny., “Why is Rent-Seeking So Costly to Growth? AER papers and Proceedings (May 1993).

            The Reversal of Liberalization