Download ECON 447-Institutions and Economic Development

Lahore University of Management Sciences
BSc Economics Programme
Course: Econ. 447, Institutions and Development: A Historical perspective.
Quarter: Spring 2006
Times: Tuesdays and Thursdays 1730-1900
Instructor: Dr. Ali Cheema, Dr. Akmal Hussain, Professor Imran Ali, Mr. Savail Hussain
Room: 154
E-mail:
[email protected],
[email protected],
[email protected],
[email protected]
Office Hours: By appointment (either e-mail or contact Wing Secretary)
Goals: The aims of this course are to firmly locate institutions at the heart of economic
performance, and therefore provide a rich picture of the determinants of economic prosperity and
stagnation in societies through time. We critically examine the modern economics literature on
institutions in the light of recent developments and use specific examples from history to
elaborate the analysis. Although historically specific these examples help concretize the broad
sweep of the analysis of the relationship between markets, institutions and economic
development. They include the economic rise of the Western World, the impact of Colonialism
on the economies of the modern developing world, and the decline of the Islamic empire
centered in the Middle-East over the course of the last five centuries. While examining the
relationship between institutions and the economic history of societies, we will also discuss
recent theoretical innovations such as path dependence, the role of norms and conventions at the
micro level and at the macro level of sustaining economic performance over time.
The institutional analysis of economic history will lead into an examination of some of the major
challenges facing the contemporary world. These include the question of sustaining life on earth
threatened by environmental degradation, the issue of international conflict and global poverty.
In this context a new perspective will be provided of the civilizational challenge to build a new
relationship between human beings, commodities and nature.
Course Description: This course has four modules. Module 1 develops the modern economic
theory of institutions and provides the basic theoretical framework for the rest of the course.
Module 2 analyzes particular episodes from economic history including the rise of the Western
World and the impact of colonialism on the economies of the developing world. Module 3
examines the historical development of the Global Economy. This module aims to provide a
perspective on the structure and dynamics of capitalism from the industrial revolution to the
contemporary period. The essential difference between the composition of the institutional
structure of developed and developing countries will be indicated in the context of structural
changes in the global economy during the period of the late 18th century to the beginning of the
21st century. Module 4 explores a new perspective on the present challenge of sustainable
development in the face of the latest evidence on threshold levels of damage to the life support
system of the planet. The relationship between the growth of capitalism and human
consciousness during the last three centuries will also be examined and the characteristic features
of the relationship between human beings and commodities in capitalist society will be
identified. This will form the basis for discussing the challenge of sustaining life on earth in
terms of institutional structures, production and value systems.
Lecture
Topic
1. Institutions, institutional change and economic performance
1
Growth and Institutions: What does the
empirical literature suggest?
2
What are institutions? Distinguish between
institutions and organizations.
3
Why are institutions important for growth?
4
The process and direction of institutional
change I
5
The process and direction of institutional
change II
6
Initial conditions and path dependence. Are
there significant network (cluster) effects?
2. Theory and History
7
The rise of the Western world
8
Early medieval trade in the Mediterranean
9
Economic under-development in the middle
east: Why the Islamic empire declined?
10
The Colonial origins of economic development
11
The empirical evidence for the negative
outcomes of unequal property rights settlements
12
A critique of the neo-institutionalist approach
13
Institution building: Some lessons from the
private sector and community organization I
14
Institution building: Some lessons from the
private sector and community organization II
3. The Historical Development of the Global Economy: Growth, Inequality
and Institutions
15
The structure and dynamics of capitalism. The
essential difference between the composition of
the institutional structure of developed and
developing countries in the context of structural
changes in the global economy during the
period late 18th century to the beginning of the
21st century. I
16
The structure and dynamics of capitalism The
essential difference between the composition of
the institutional structure of developed and
developing countries in the context of structural
changes in the global economy during the
period late 18th century to the beginning of the
21st century. II
4. New Horizons for World Development: Commodities, Nature and Human
Civilization.
17
A new perspective on the present challenge
of sustainable development in the face of
the latest evidence on threshold levels of
damage to the life support system of the
planet. The challenge of sustaining life on
earth will be discussed in terms of the
institutional structure, production and value
systems.
18
19
20
The relationship between the growth of
capitalism and human consciousness during the
last three centuries: The characteristic features
of the relationship between human beings and
commodities in capitalist society will be
identified in classroom experiments using
semiotic analysis techniques. This will form the
basis of discussing the possibility of a new
relationship between human beings,
commodities and nature drawn from the shared
wellsprings of humanity.
An overview of what we have explored
Exam
Lecture: Twenty 100 Minute Lectures
Texts: The reading List is appended to the course outline
Grading:
 Class Participation
15%
 Mid term Concept Paper
20%
(Students will be required to submit their paper, approximately 1000 words each, starting
from the 4th week)
 Term Paper (5000 words)
30%
 Final Exam
35%
Notes:

The lectures will only cover key arguments in each reading. The students will be
expected to read the remaining set of issues on their own.
 The term-paper may be an extended version of the mid-term paper.
 Students can develop the mid-term paper and full term paper questions in
collaboration with the instructors.
Module I: Institutions, institutional change and economic performance.
Lecture 1. Institutions and Development: What does the empirical literature suggest?




North, D.C; Eggertsson, T; Alston, L.J (Editors). Empirical Studies in Institutional
change. Cambridge University Press, 1996. Chapters 1 and 2.
Acemoglu, D. Johnson, S. Robinson, J. The Colonial Origins of Comparative
Development: An Empirical Investigation. December 2001, American Economic Review,
volume 91, pp. 1369-1401.
Chang, H. Kicking away the ladder: Anthem Press, 2002. Chapters 1, 2, 3, 4.
Barro, R. Martin, X. Economic Growth. MIT, 2005. Chapters 1 and 12.
Lecture 2. What are Institutions? Distinction between Institutions and Organizations. Why are
institutions important for growth?



North, D.C. Institutions, Institutional change and Economic performance, Cambridge
University Press, 1990. Chapters 1, 2, 3, 4,5
Greif, A. Institutions and the path to the modern economy: Lessons from Medieval trade.
Forthcoming in Cambridge University Press. Introduction and Chapter 1.
Acemoglu, D. Johnson, S. Robinson, J. Institutions as the fundamental causes of Longrun growth. Forthcoming in the Handbook of Economic growth. Aghion, P. Darluff, S.
(Editors). Available: http://emlab.berkeley.edu/users/chad/Handbook.html
Lecture 3and 4 The process and direction of institutional change.

North, D.C. Institutions, Institutional change and Economic performance, Cambridge
University Press, 1990. Part II.

North, D.C. Understanding the process of Economic change. Princeton University. Part I
and chapters 7, 9, 10, 11, 12.

Greif, A. Institutions and the path to the modern economy: Lessons from Medieval trade.
Forthcoming in Cambridge University Press. Chapters X, Y.

Knight, J. Institutions and Social conflict. Cambridge University Press. Introduction and
Chapters 4 and 5.
Lecture 5 Learning; initial conditions; and path dependence. Are there significant network
(cluster) effects?


North, D.C. Institutions, Institutional change and Economic performance, Cambridge
University Press, 1990. Part II.
Greif, A. Institutions and the path to the modern economy: Lessons from Medieval trade.
Forthcoming in Cambridge University Press. Chapters X, Y.
2. Theory and History
Lecture 6 The rise of the Western world



North, D.C and Thomas, R.P. The rise of the Western world: A new Economic history.
Douglass C. North and Robert Paul Thomas, Cambridge University Press, 1973.
North, D.C. Understanding the process of Economic change. Princeton University.
Chapters 10, 11
Mokyr, J. Long-run Economic growth and the history of technology. Forthcoming in the
Handbook of Economic growth. Aghion, P. Darluff, S. (Editors). Available:
http://emlab.berkeley.edu/users/chad/Handbook.html
Lecture 7 Early medieval trade in the Mediterranean


Greif, A. Institutions and the path to the modern economy: Lessons from Medieval trade.
Forthcoming in Cambridge University Press. Chapters X, Y.
North, D.C. Understanding the process of Economic change. Princeton University.
Chapters 6 and 9.
Lecture 8 Economic under-development in the middle-east: Why the Middle-East declined?

Kuran, T. The Islamic Commercial Crisis: Institutional Roots of Economic
Underdevelopment in the Middle East. Journal of Economic History, 63 (June 2003):
414-46.

Kuran, T. Why the Middle East Is Economically Underdeveloped: Historical
Mechanisms of Institutional Stagnation. Journal of Economic Perspectives, 18 (2004):
71-90.
Lewis, B. What went wrong? Oxford University Press, 1999.

Lecture 9 Colonialism, Institutions and Economic development

Acemoglu, D. Johnson, S. Robinson, J. The Colonial Origins of Comparative
Development: An Empirical Investigation. December 2001, American Economic Review,
volume 91, pp. 1369-1401.

Acemoglu, D. Johnson, S. Robinson, J. Institutions as the fundamental causes of Longrun growth. Forthcoming in the Handbook of Economic growth. Aghion, P. Darluff, S.
(Editors). Available: http://emlab.berkeley.edu/users/chad/Handbook.html
Lecture 10. The empirical evidence for the negative outcomes of unequal property rights
settlements

Banerjee, A. Iyer, L. History, institutions and economic performance: The legacy of
colonial land tenure systems in India. Journal of Economic Literature, October 2004.
Lecture11. Economic Development in the Punjab during the British Raj.


Ali, I. The Punjab and the Retardation of Nationalism. Published in: Low, D. The
Political Inheritance of Pakistan. Cambridge University Press, 1991.
Ali, I. Punjab under Imperialism. Oxford University Press, 1988.
Lecture 12. The fetters to the development of Capitalism in Pakistan.
Lecture 13. A critique of the Neo-institutionalist approach.


North, D.C; Eggertsson, T; Alston, L.J (Editors). Empirical Studies in Institutional
change. Cambridge University Press, 1996. Introduction and Chapter 1.
Knight, J. Institutions and Social conflict. Cambridge University Press, 1992.
Introduction.
Lecture 14. Institution building: Some lessons from the private sector and community
organization
3. The Historical Development of the Global Economy: Growth, Inequality and Institutions
Lecture 15 and 16 The structure and dynamics of capitalism.

Robert Heilbronner, 21st Century Capitalism, Norton & Company, London 1994, Chapter
3.

Hussain, A.: Imperialism, paper in the Encyclopedia of Capitalism, Golson Books, Ltd.
New York, June 2004.

Stiglitz, J: Globalization and its Discontents, Allen Lane, The Penguin Press, London,
2002, chapters 1, 2 and 3.
4. The Growth of Capitalist institutions, Human consciousness and Sustainable
development: Towards a new perspective.
Lecture 17 and 18 Sustainable development and the relationship between the growth of
capitalism and human consciousness during the last three centuries.

Barthes, R: Mythologies, Paladin, Glasgow, 1973, Pages 95 to 97.

_____________ Image, Music, Text, chapter titled: Mythology Today, Fontana
Paperbacks, London, 1990.

Marcuse, H: Eros and Civilization, Sphere Books Ltd. London, 1970, chapters 1, 3,4,7,8
and 9.
Lecture 19 A review of what we have explored


North, D.C. Understanding the process of Economic change. Princeton University.
Chapters 12 and 13
Williamson, O. The New Institutional Economics: Taking stock. Journal of Economic
Literature, 38, 2000.
Reading List
Acemoglu, D. Johnson, S. Robinson, J. The Colonial Origins of Comparative Development: An
Empirical Investigation. December 2001, American Economic Review, volume 91, pp. 13691401.
Journal of Aghion, P. Darluff, S (Eds). A Handbook on Economic Growth, Forthcoming.
Available: http://emlab.berkeley.edu/users/chad/Handbook.html
Barthes, R: Mythologies, Paladin, Glasgow, 1973, Pages 95 to 97.
_____________ Image, Music, Text, chapter titled: Mythology Today, Fontana Paperbacks,
London, 1990.
Bates, R.H. Prosperity and violence: The Political Economy of Development. Princeton, 2000.
Barro, R. Martin, X. Economic Growth. MIT Press, 2005.
Chang, H. Kicking away the ladder: Anthem Press, 2002.
Delong, B. Shleifer, A. Princes and Merchants. Reprinted in The Grabbing hand, Andrei Shleifer
and Robert Vishny, (Eds), Harvard University Press, 1998.
Grief, A. Institutions and the path to the Modern Economy: Lessons from Medieval trade.
Cambridge University Press, Forthcoming.
Heilbronner, R. 21st Century Capitalism, Norton & Company, London 1994
Hussain, A.: Imperialism, paper in the Encyclopedia of Capitalism, Golson Books, Ltd. New
York, June 2004.
Knight, J. Institutions and social conflict. Cambridge University Press, 1992.
Kuran, T. The Islamic Commercial Crisis: Institutional Roots of Economic Underdevelopment in
the Middle East. Journal of Economic History, 63 (June 2003): 414-46.
Kuran, T. Why the Middle East Is Economically Underdeveloped: Historical Mechanisms of
Institutional Stagnation. Journal of Economic Perspectives, 18 (2004): 71-90.
Lewis, B. What went wrong? Oxford University Press, 1999.
Marcuse, H: Eros and Civilization, Sphere Books Ltd. London, 1970, chapters 1, 3,4,7,8 and 9.
North, D.C and Thomas, R.P. The rise of the Western world: A new Economic history. Douglass
C. North and Robert Paul Thomas, Cambridge University Press, 1973.
North, D.C, Structure and change in Economic history, Cambridge University Press, 1981.
North, D.C. Institutions and Credible commitment. Journal of Institutional and theoretical
Economics, 149:1, 1993.
North, D.C. Institutions, Institutional change and Economic performance, Cambridge University
Press, 1990.
North, D.C. Understanding the process of Economic change. Princeton University Press, 2005.
North, D.C; Eggertsson, T; Alston, L.J (Editors). Empirical Studies in Institutional change.
Cambridge University Press, 1996.
Polanyi, K. The Great Transformation. Beacon Press, 1957
Williamson, O. The New Institutional Economics: Taking stock. Journal of Economic Literature,
38, 2000.
Santarelli, E. Figini, P: Does Globalization Reduce Poverty? Some Empirical Evidence for the
Developing Countries, chapter in, Eddy Lee and Marco Vivarelli (eds.), Understanding
Globalization, Employment and Poverty Reduction, Palgrave Macmillan, New York, 2004.
Stiglitz, J: Globalization and its Discontents, Allen Lane, The Penguin Press, London, 2002,
chapters 1, 2 and 3.