Institutions, Growth and Governance In The Third World

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The recent research has used the work of Douglas North as the foundation on which the case of institutions as ultimate driver of development could be built. North describes institutions as the humanly devised constraints that shape human interaction." These are powerful metaphors for our ears, accustomed to think in terms of 'constrained maximization' as the rule guiding personal actions. This book explores complicated issues like: Institutions and geography, New Kaldor facts, institutions and endowments, Institutions and culture, Good Governance and growth in the new century.

Dr. S.V. Hariharan is the Former Senior Professor and Head, Department of Econometrics in the School of Economics, Madurai Kamaraj University, Madurai. His areas of specialization are International Economics and Quantitative Economics. He has published more than 20 books in the areas of South-South Trade, external debt, informal sector, trade in services, technology transfer, Global Financial Crisis, etc,. He has published several research papers in International Economics on issues related to exchange rate behaviour, New World Order, Regional groupings etc., He was the recipient of Young Social Scientists' Career Award from the UGC of India. He has been engaged actively in teaching and research for the past four decades.

The historical record does not seem to support the notion that any particular institution, narrowly defined, is indispensable for growth. Moreover, we discuss how the evidence that there are systematic patterns to the ways institutions evolve, undercuts the idea that exogenous change in institutions is what powers growth. Institutions do matter. However, it is important to understand how they are profoundly influenced by the political and economic environment; if any aspect of institutions is crucial for growth, it is that institutions must change over time as circumstances change.

We cannot conceive of processes of economic growth that do not involve institutional change; we outline some reasons why one should be cautious about grounding a theory of economic growth on institutions. We emphasize how very different institutional structures have often been found to be reasonable substitutes for each other, both in dissimilar as well as similar contexts.

Explanations for Growth

Some contend that rapid population growth has sometimes proved beneficial, fostering lower labor costs or the advantages in scale effects that come from higher total demand.Others argue for the benefits of relatively slow growth in population, because lower population density encourages higher per capita incomes and higher rates of capital formation.

Nevertheless, these, and other so-called economic explanations, say little explicitly about 'non-economic' factors and institutions, although this does not mean that the latter are not implicit in the analysis.

Discussions of the role of 'non-economic factors (encompassing the cultural, political and institutional) in accounting for differences across societies in economic development can also be traced back many centuries. Several of the classical theories for the rise of European capitalism and the onset of modern economic growth are based on conditions that clearly fall outside of the conventional economic sphere. These are such factors as the spread of particular religious beliefs, be it the Protestantism as pointed out by Max Weber, the Judaism, highlighted by Werner Sombart, or shifts in the orientation of dominant religions.

Other arguments underline the important contribution of the advance of scientific and rational thought, or the impact of changing tastes for consumer goods and the effects on choices between work and leisure on the supply and intensity of labor during early industrialization. Changes in legal systems, in the extent of social capital and, in the nature of political organization and the extent of democracy, have been advocated as critical factors explaining differentials or shifts in economic performance.

**Contents and Sample Pages**