The paper will give a general overview on Douglass C. North’s theoretical work during the last twenty years on economic history as well as on new institutions economics and institutional change. While the paper is more concerned on how North approaches the origin and development of the state via property rights it also will take his theory of institutional change and the way he emphasizes economies of scale and transaction costs into account.
Part One of this paper will give a short introduction into the topic of the philosophy of the state. This will be followed by North’s argumentation and thus his philosophy of the state derived in his numerous works.
To begin with, Part Two of this paper gives an introduction into North’s argumentation on the role of property rights for economic growth. Part Three will then explain what role government has in economic organization. The role of economies of scale for property rights and fiscal policies will be looked upon thereafter in Part Four. The circle will then be closed by linking economic growth and property rights with the development of the state. Analogously to North’s argumentation in his book “The Rise of the Western World” the paper takes a section of ten millennia in economic history in order to explain the tension between property rights and the role of government as North sees it. North’s model of the state will then be introduced in Part Six, followed by a short introduction into his Theory of Institutional Change in Part Seven of this paper.
A short critique will be given at the end.
Table of Contents
I. INTRODUCTION
II. PROPERTY RIGHTS AND THEIR ROLE FOR ECONOMIC GROWTH
III. GOVERNMENT AND ITS ROLE IN ECONOMIC ORGANIZATION
1. PUBLIC GOODS
2. FREE-RIDER PROBLEM
IV. THE ROLE OF ECONOMIES OF SCALE FOR PROPERTY RIGHTS AND FISCAL POLICIES
1. THE EXISTENCE OF ECONOMIES OF SCALE ON THE MARKET
2. ECONOMIES OF SCALE INFLUENCE ON THE FISCAL POLICY
V. FROM FEUDAL MANOR TO THE MODERN STATE
1. 10TH CENTURY FEUDALISM
2. THE MALTHUSIAN TRAP OF THE 13TH CENTURY – FIRST CHANGES IN PROPERTY RIGHTS
3. FAMINE, PESTILENCE AND WAR – FURTHER CHANGES IN PROPERTY RIGHTS
4. THE EARLY MODERN PERIOD – 16TH AND 17TH CENTURY
5. THE INDUSTRIAL REVOLUTION AND SECOND ECONOMIC REVOLUTION
i. Industrial Revolution
ii. Second Economic Revolution
VI. A FRAMEWORK FOR ANALYZING ECONOMIC ORGANIZATION IN HISTORY – NORTHS MODEL OF THE STATE
1. A MODEL FOR ECONOMIC GROWTH
2. A THEORY OF THE STATE
i. North’s model of the state
ii. A theory of transaction costs
iii. A theory of ideology
iv. Deficiencies
VII. THEORY OF INSTITUTIONAL CHANGE
1. UNDERLYING INSTITUTIONAL FRAMEWORK
2. IMPLICATIONS FOR THE POLITICAL-ECONOMIC SYSTEM
3. CHANGES OVER TIME
VIII. SUMMARY AND CRITIQUE
BIBLIOGRAPHY
Objectives and Topics
This paper aims to provide a comprehensive overview of Douglass C. North’s theoretical contributions to economic history and the study of institutional change, specifically focusing on his property rights approach to understanding the origin and development of the state.
- Analysis of Douglass C. North's intellectual framework regarding economic history.
- The role of property rights and transaction costs in economic growth and organization.
- Examination of the state as an organization providing protection in return for revenue.
- Historical transition of states from feudal manors to modern nation-states.
- Evaluation of North’s models of state behavior, institutional change, and ideology.
Excerpt from the Book
i. North’s model of the state
North’s goal is to explain the widespread of states that produce inefficient property rights and hence fail to achieve sustained growth, as well as the inherent instability of states that leads to economic change and decline.
His model is based upon a state with a single ruler, who is maximizing his own utility or wealth. Furthermore, a tension between ruler and constituents exists that leads to the dilution of the ruler’s control and to the emergence of political pluralism. The state has three main characteristics: (1) there is an exchange process between the ruler and its constituents where the state trades a group of services (protection and justice) for revenue (taxes). Due to economies of scale the total income of society is higher than if each individual had to protect his own property. Conditions that determine the terms of exchange are as follows: (2) the state attempts to act like a discriminating monopoly, separating each group of constituents and devising property rights for each so as to maximize state revenue. (3) The state is constrained by the opportunity costs of its constituents since potential rivals, who can provide the same set of service do always exist from within or outside the state.
Summary of Chapters
I. INTRODUCTION: Provides an overview of the philosophy of the state and introduces Douglass C. North's departure from neoclassical economic theory.
II. PROPERTY RIGHTS AND THEIR ROLE FOR ECONOMIC GROWTH: Explains how efficient economic organization and properly defined property rights are essential for long-run per capita income growth.
III. GOVERNMENT AND ITS ROLE IN ECONOMIC ORGANIZATION: Analyzes the government as an organization providing protection and justice, addressing public goods and the free-rider problem.
IV. THE ROLE OF ECONOMIES OF SCALE FOR PROPERTY RIGHTS AND FISCAL POLICIES: Discusses how transaction costs and economies of scale influence market development and government fiscal strategies.
V. FROM FEUDAL MANOR TO THE MODERN STATE: Traces the evolution of states over ten millennia, showing how changes in property rights and market needs drove institutional transformations.
VI. A FRAMEWORK FOR ANALYZING ECONOMIC ORGANIZATION IN HISTORY – NORTHS MODEL OF THE STATE: Presents North's analytical framework, combining neoclassical growth models with theories of the state, transaction costs, and ideology.
VII. THEORY OF INSTITUTIONAL CHANGE: Examines how institutions function as frameworks for human interaction and the factors, including time and military technology, that drive their change.
VIII. SUMMARY AND CRITIQUE: Offers a final assessment of North's contributions, noting both the utility of his framework and its current theoretical limitations.
Keywords
Douglass C. North, property rights, economic history, institutional change, state theory, transaction costs, economies of scale, public goods, free-rider problem, economic growth, feudalism, fiscal policy, ideology, neoclassical economics, institutional framework
Frequently Asked Questions
What is the fundamental focus of this paper?
The paper examines the theoretical work of Douglass C. North, specifically how he integrates history, institutions, and property rights to explain the economic development of states.
Which key topics does the work address?
Key themes include the role of property rights in economic growth, the state as a provider of public goods, the impact of economies of scale on fiscal policy, and the evolution of political-economic systems.
What is the primary objective of the research?
The objective is to map out North’s intellectual path in deriving a framework for understanding economic change, moving beyond the limitations of classical neoclassical models.
What scientific methodology does the author employ?
The author uses a historical-institutional approach, analyzing North’s scholarly works to demonstrate how he modifies traditional economic assumptions to account for reality and the passage of time.
What is covered in the main body of the text?
The main body moves from theoretical foundations—such as transaction costs and public goods—to a historical analysis of state evolution from the 10th century to the Industrial Revolution, concluding with North’s specific models of state behavior.
What are the essential keywords associated with this research?
Primary keywords include Douglass C. North, property rights, institutional change, transaction costs, economic history, and state theory.
How does North differentiate between the contract theory and the predatory theory of the state?
North argues that contract theory views the state as a wealth maximizer for society, while predatory theory views the state as an agency for a specific ruling class; he contends both are necessary to explain real-world instability.
What role does the "free-rider" problem play in North’s analysis of the state?
The free-rider problem serves as a justification for government intervention, as voluntary group action often fails to efficiently provide essential public goods like protection and justice.
Why does the author consider North's theory of ideology "descriptive rather than normative"?
The author argues that while North’s ideology theory provides useful categories to explain human behavior, it currently acts more as a collection of observations than as a formal, rigorous economic theory.
How does military technology influence the size and structure of a state according to the text?
The text explains that military technology, combined with costs of compliance and urgency, determines the distribution of power and sets an upper bound on the geographic size of the state.
- Arbeit zitieren
- Nicole Petrick (Autor:in), 2006, Property Rights Approach to Government - Douglass C. North's Historic Economic Perspective on the Philosophy of the State, München, GRIN Verlag, https://www.hausarbeiten.de/document/73651
