Understanding the Process of Economic Change North 2005

I have a crush on North from the World Bank paper on water. These two chapters didn't indulge that as much, but there was some butter on the bread. This is mostly North's narrative for the history of economic and institutional development/evolution.

I like his focus on impersonal exchange as fundamental to markets, and his examination of what institutions are necessary to make it possible in a given society.

Quoting Easterlin 1999 "The functions of this system have included in varying degrees health education, regulation, compulsion, and the financing or direct provision of services. The establishment of a public health system has required acceptance of social responsibility for the control of major infectious disease. This shift in norms came about as the advance of biomedical knowledge increasingly pointed to factors beyond individual control as the primary source if disease."

My notes on that was "why most infectious disease control be cooperative."

"...the development of science in the sixteenth and seventeenth centurues and its application to solving problems of scarcity beginning, for the most part, in the late nineteenth century in the German chemical industry is a well worked story" And it is one that I have never heard before.

In chapter ine he presents some fantastic arguments demonstrating what insititutions are necessary to create functioning markets. "The Western world has haad a long gestation period to work out the interconnections to make markets work more efficiently although still far from ideally. But developing countries face a far more daunting task. To survive and grow in the context of the competition from the already develop world, they must deliberately construct an effetive price system and supplement it by creating the institutions and organizations to integrate that knowledgte at low costs of transacting. Standard economic theory is no help as a guide. It would imply that someone froma developing economy who acquired the advanced knowledge in say chemistry would command a wage commensurate with the relative scarcity of such knowledge in a developing country and therefore automatically provide the correct incentives to resolve the problem. In fact that person will command a far higher wage in a developed economy. It is only when that specialized knowledge can get integrated with other complementary knowledge at low cost that it is very valuable."p120

In a list of necc conditions on the next page, I was caught up in the potential applicability of #3 to my own interests: "Trade will make the individual better off only if the increased uncertainty due to specialization is more than compensated for by the reduction in uncertainty resulting from the availability of wider variety"

"Mancur Olson 's The Rise and Decline of Nations (1982) studies the inherent tendency of markets to develop sclerosis over time in the absence of "revolutionary institutional change".