A. Gerschenkron, ‘The Approach to European Industrialization: A Postscript’, in Economic Backwardness in Historical Perspective (USA: Harvard University Press, 1962) pp 353-364

[page 353] Europe in the 19thC was a continent in which many different states were at many different states of backwardness. The degree of backwardness had a distinct impact on the way in which the state developed economically. The variations in the course and character of their industrialisation can be surmised in six propositions.

  1. “The more backwards a country’s economy, the more likely was its industrial8isation to start discontinuously as a sudden great spurt proceeding at a relatively high rate of growth of manufacturing output.
  2. [354] The more backwards a country’s economy, the more pronounced was the stress in its industrialisation on bigness of both plant and enterprise.
  3. The more backwards a country’s economy, the greater was the stress upon a country’s stress on producers’ goods as against consumers’ goods.
  4. The more backwards a country’s economy, the heavier was the pressure upon the level of consumption of the population.
  5. The more backwards a country’s economy, the greater was the part played by special institutional  factors designed to increase supply of capital to the nascent industries and, in addition, to provide them with less decentralised and better informed entrepreneurial guidance; the more backwards the country, the more pronounced was the coerciveness and comprehensiveness of these factors.
  6. The more backwards a country, the less likely was its agriculture to play any active role by offering to the growing industries the advantages of an expanding industrial market based in turn on the rising productivity of agricultural labour.”

The countries of Europe could roughly be split up into three groups, advanced, moderately backwards and very backwards. Although not a discrete scale, the effects of number 5 can be seen in qualitative differences in industrialisation.

[355] In moderately backwards countries Factories were directed with banks towards capital and entrepreneurial guidance; in very backwards countries they were directed by banks and the state.

[356] There are historical similarities across all successful industrialisations. England is like Germany is like Russia. But there are big differences which are important to examine. In moderately backwards Germany capital was directed by banks whereas in very backwards Russia the state played a large role in directing capital.

Certain things are held to be essential for industrialisation; the abolition of archaic modes of agricultural production with a concomitant increase in productivity; the creation of an influential elite materially or ideologically interested in economic change; the necessary social capital in an area’s residents; a value system favouring entrepreneurial endeavour. [357] However, there are considerable conceptual and empirical problems with a simplistic modernisation story of industrialisation.

It is difficult to say whether certain preconditions are in fact necessary for industrialisation to occur. Industrialisation may have begun in Russia even without the abolition of serfdom, for example, yet it is commonly held that the end of serfdom was a necessary condition for the onset of industrialisation.

Just because something was necessary for industrialisation in one country, for example England, it does not mean it is necessary for industrialisation in all countries. Empirically this is true, either the preconditions for English industrialisations were not present in late industrialisers or were present to a very small extent.

[358] Therefore, to some extent countries substituted for these missing preconditions, as described in point 5 above. Capital for enterprise in advanced countries could have been provided by previously accumulated wealth, in backwards countries banks and states created similar conditions in the course of industrialisation which were not present because of their backwardness. [359] This substitution was not necessarily a conscious substitution; people groped for effective methods and substitutions were created as needed.

Gerschenkron’s approach allows him to “predict” what he expects to find, and give him the ability to test his theory. He looked Italian industrialisation, where as a moderately backwards country he expected to find banks playing a central role in the process, he did indeed find banks playing a central process in Italy’s industrialisation. This method of industrialisation was imported from Germany where it had already proved successful.

[360] Gerschenkron’s work is an attempt to explain the deviations from England’s method of industrialisation. It uses the degree of backwardness as an organising concept. Russia’s industrial structure was shaped by its backwardsness, it focussed on capital goods because it had to import much productive technology and because technological development in the immediately preceding period had been more focussed on capital goods. [361] However, as well as this economic factor, capital goods were favoured for political reasons, for improving the Russian states backwards war making apparatus.

[362] The Bulgarian experience, which saw no industrial take off, shows us that lacking the correct institutions it is possible to miss out on industrialisation. [353]There are advantages to backwardness because the stock of knowledge on which can be drawn increases, but there are also disadvantages and it is easy to miss the opportune moment for industrialisation as Italy did.

[364] The degree of backwardness may not be the defining characteristic of how a country will industrialise, but it remains a very useful  conceptual tool.

Kenny, Charles (2005) “Why Are We Worried About Income? Nearly Everything that Matters is Converging” in World Development Vol. 33, No. 1, pp. 1–19

[1] Summary. — Convergence of national GDP/capita numbers is a common, but narrow, measure of global success or failure in development. This paper takes a broader range of quality of life variables covering health, education, rights and infrastructure and examines if they are converging across countries. It finds that these measures are converging as a rule and (where we have data) that they have been converging for some time. The paper turns to a discussion of what might be driving convergence in quality of life even as incomes diverge, and what this might mean for the donor community.

Everyone is interested in economic convergence; it would represent the catching up of the poor world with its rich contemporary. Basically, everywhere started poor, but now some places are wealthy. Income has been the sole, or at least overriding criteria, for some time and this stems from a humanitarian impulse to see improvements in the global standard of living. Kenny quotes Lucas:

[I]s there some action a government could take that would lead the Indian economy to grow like Indonesia s or Egypts? If so, what exactly? If not, what is it about the ‘‘nature of India’’ that makes it so? The consequences for human welfare involved in questions like this are simply staggering: once one starts to think about them, it is hard to think about anything else (Lucas, 1988).

[2] This interest in income comes from the linking of income to most if not all quality of life measures. Even if income isn’t your main focus in a humanitarian sense, an increasing income in a poor country will probably help you achieve your aim. As income has diverged many have inferred that quality of life was diverged as well. However, while income has diverged, quality of life measures are converging almost across the board.

The link between the quality of life an income

GDP per capita is an incomplete measure of wellbeing, this is one of the reasons HDI was introduced by the UN. In fact, from infant mortality to life expectancy to war deaths per capita, there is very little correlation between income, income growth and other quality of life indicators. If you have been seeking to increase someone’s life, then increasing their income may not be the easiest way to do so.

Evidence for the convergence in measures of the quality of life

This paper builds on the work of Crafts, Ram and Ingram.

HDI of poor and rich countries are converging, despite relative inequality and massive poverty remaining common. [2-3] Calorific intake, primary enrolment and urbanisation are all converging.

Methods of measuring convergence and methodological issues

 There is a discussion of different measures of convergence and divergence here which kinda goes over my head. I will revisit if necessary.

Data quality is an issue, with income and all other quality of life data.

[4] Weighting is also problematic, should China count the same as Sierra Leone, or should measures be weighted to reflect China’s massive population? Using individual data rather than national per capita data can massively change our analysis.

Which quality of life measures to use is also a  question which is important. There seems little scientific way to select which measure to use and how much importance to give it. However, effort has been made to use measures for which there is good coverage in area and time.

Results

The results presented in Appendix Tables 11–13 suggest almost every potential quality of life variable shows significant variation across countries. In turn, this suggests that, either throughout history some quality of life indicators have been higher in some parts of the world than others, or that, in some point in the past, there must have been divergence. The available evidence suggests elements of both stories, although with a predominance of the second. The evidence also suggests that more recently (for most of the 20th century) the story is reversed—it is one of convergence [my emphasis].

Maddison shows that the long term and continuing pattern in income is one of divergence. In 1000 AD Western Europe and Africa had roughly equal GDP per capita ($400), but by 1998 Africa had reached the income Europe had in the early 19th C whereas Europe’s income was now 13 times that. Since 1950 inequality has not so much continued to diverge as stagnate.

[5] However, apart income GDP, and depending on which measure of convergence you use, all or nearly all other measures have converged since the industrial revolution worldwide.

Health

There is a historical minimum life expectancy of around 24 (younger than this and presumably societies just collapse). Divergence occurred from the early modern period until the end of the 19th C and then convergence in life expectancy began.  This convergence in life expectancy has been driven by a convergence in infant mortality. Calorific intake improved in many places and this has in part driven the convergence, although this factor is unlikely to have been enough to enough to explain all the convergence.

Education

Divergence in literacy levels can be traced back before the 18th C. By 1913 literacy in India was 13% and in the UK around 96%. Global literacy in the rich world has reached ~100% and the poor world’s literacy has improved too, closing the gap. Between 1950-99 global literacy rose from 52% to 81%, driven largely by improvements in the poor world.

A driving factor in this is the increased availability of primary education. Tertiary education has also become more common in the developing world.

Social Indicators

Female literacy as a percentage of male literacy (an important measure of economic potential and gender equality), has converged since the 1970s from 59% to 80%. The percentage of children not in the global labour force has also decreased from 76% to 90%.

War deaths per capita is the least encouraging measure. The world remained a war like place in the developing world throughout the end of the 20th C.

Other, more lighthearted but important, measures have also converged. Beer production per capita has nearly doubled since 1950, representing an increase in “non-necessary” production.

What is going on?

Why have we seen convergence in quality of life measures accompany divergence in income?

There  could be large returns to small increases in income for the very poorest people. A little extra food can hugely improve the immune system for example.

How do we explain the performance of Africa over the last 50 years? GDP per capita has increased from $477 to just $561 over the 40 years (1960–99), falling from 4.8% to 1.9% of the average for a high-income country. Compare this to an under-five survival rate which has risen from 746 to 839 per 1,000 live births over the same period—or 77% of the high income survival rate to 84% of that rate. In terms of infant survival (86–91%), life expectancy (57–60%, despite the impact of the AIDS crisis reducing life expectancy by three years 1992– 99) and gross primary enrollment (35–70%), the trend is also one of convergence (all figures from World Bank, 2000). While Africa remains far behind, it is catching up on these measures, which is more than can be said for its performance on income.

Ingram argues that income tends to have a declining marginal impact on quality of life. Small increases in income reap massive rewards.

However, there appears to be more going on (even if the above argument appears very important). Mozambique saw it’s per capita income decline over the period 1950-99 but its life expectancy, literacy and primary enrollment all increased.

Looking at the data they show us that it takes one tenth of the income that it did in 1870 to live the same amount of time. Life expectancy for countries with a GDP per capita today of $300 have the same life expectancy as countries of 1870 with a GDP per capita income of $3000. Life expectancy has also become far more egalitarian than it was in 1870.

Better immunisation plays a role. Increase in primary enrollment and literacy have helped the efficacy of other public health campaigns, who can now use posters, where they before had to rely on word of mouth. 

To back up this “public health policy not just income helps improve quality of life” argument it has been observed that urban mortality is lower than rural mortality – something only achieved in Europe and the US after extensive public health campaigns.

Conclusions

Different income measures yield different degrees of divergence. For example, the proportion of people living in extreme poverty (less than $1 a day) has decreased tremendously; a massive convergence with the rich world. However, income has diverged in more general terms.

While aid, the Washington Consensus or globalisation have had mixed outcomes with respect to income, by other measures they should surely deserve some degree of credit for the almost across the board improvement in quality of life measures.

The debate today rests on the assumption that there has been a failure in the developing world, because there has been so little improvement in income, perhaps this pessimism is misplaced.

Protected: EH483 Notes for Students (Rather a lot of LSE information here so I’m password protecting this one)

This content is password protected. To view it please enter your password below:

EH483: The Development and Integration of the World Economy in the 19th and 20th Centuries – Indicative reading

Here.

  • B Arthur (Ed), Increasing Returns and Path Dependence in the Economy (1994)
  • M Bordo, A Taylor, J Williamson (2003), Globalization in Historical Perspective
  • J Diamond, Guns, Germs and Steel (1997)
  • S Engerman & K Sokoloff, Factor Endowments, Institutions and Differential Paths of Growth among New World Economies (1994)
  • R Findlay, K O’Rourke (2009), Power and Plenty
  • B Foster, The Vulnerable Planet: A Short Economic History of the Environment (1993)
  • J Goody, The East in the West (1996)
  • Wang Gungwu (Ed), Global History and Migrations (1997)
  • I Inkster, Science and Technology in History (1981)
  • E L Jones, Growth Recurring (1988)
  • M Livi-Bacci, A Concise History of World Population (1997)
  • P Mathias & J Davis (Eds), Agriculture and Industrialization from the 18th Century to the Present Day (1996)
  • M Obstfeld, A Taylor (2004), Global Capital Markets
  • D Puga, ‘Urbanization Patterns: European vs. Less Developed Countries’, Journal of Regional Science (1998) Here
  • A van der Woude, A Hayami & J de Vries (Eds), Urbanisation in History (1990)
  • World Bank, Global Integration and Decentralization in an Urbanizing World (1999)

Pritchett, L “Divergence, Big Time” in The Journal of Economic Perspectives, Vol. 11, No. 3. (Summer, 1997), pp. 3-17.

From here.

The topic of this paper is the massive divergence which has been observed between currently rich countries (European Countries and their offshoots plus Japan) and the other countries. No grouping is really all that accurate, but the theme of divergence in growth rates, productivity and wealth split the world into two fairly distinct groups.

The period discussed is that since 1870s. This if often chosen as a start date for “modern” economic history. First of all, for rich countries decent economic information is available more or less uninterrupted since this date. Also 1870 follows on from a series of major events, US Civil War, Franco-Prussian War, and Japan’s Meiji Restoration.

The above table is used to illustrate a number of things. First of all, there was some sort of Golden Age for capitalism between the end of the war and the end of the 1970s. There is a strong convergence within this subset of countries; the poorest six countries in 1870 had five of the six fastest national growth rates for the time Period. 1870 to 1960. The five richest in 1870 had the five slowest growth rates.

Secondly, Even with the catch up of the poorest countries growth rates are relatively uniform: the standard deviation of the growth rates is only .33. Evans (1994) formally tested the hypothesis that the growth rates of European countries and their offshoots (not Japan) were equal in the period and could not reject it.

Thirdly, although there has been substantial variation over time there has been no substantial acceleration of growth rates over time. Growth rates have been remarkably stable.

Unfortunately all these observations are drawn from a self selecting group of countries which are now rich; the observation they have grown strongly and consistently over the last 100+ years and that they are now rich is almost tautological. Countries like Japan which did converge are included, but countries which didn’t like Argentina are not.

A Lower Bound for GDP

There is a paucity of data for historically poor for a variety of obvious reasons. However, there is a physical limit on how poor a country can be, “even deprivation has its limits.” Pritchett argues that $250 expressed in 1985 purchasing power equivalents is the lowest GDP per capita could have been in 1870.

No one has ever observed lower living standards in the modern poor world; this level is set well below modern levels of “absolute poverty” and is at the limit of viable nutritional intake; a lower standard of living and the population could not expand.

PPP is very important in measuring living standards in poor countries (see disclaimer here), tradeable goods cost more or less the same everywhere, but haircuts etc are much cheaper in poor countries. $70 in 1985 US market exchange rate dollars = our P$250 minimum GDP per capita level.

Divergence, Big Time

If you accept: a) the current estimates of relative incomes across nations; b) the estimates of the historical growth rates of the now-rich nations; and c) that even in the poorest economies incomes were not below P$250 at any point-then you cannot escape the conclusion that the last 150 years have seen divergence, big time.

If we assume that all countries have grown at roughly the same rate and backcast from now then we come to the conclusion that soem countries had incomes lower than P$100 in 1870, since this is impossible then we must have seen massive divergence.

The magnitude of the divergence is staggering. From 1870 to 1990 the average absolute gap in incomes of all countries from the leader had grown from $1,286 to $12,662, an order of magnitude.(pp 9-12 are well illustrated and should be read in full). Bairoch (1993) argues that developed countries and developing countries were largely economically equal as late as 1800, this implies and even more startling era of divergence since.

Divergence is not a thing of the past

There are a number of countries catching up and growing at historically unprecedented rates (Korea, Taiwan, etc), but manuy continue to stagnate and some have even regressed (i.e. negative growth rates since 1960). Many countries have seen slowdowns and some have seen “meltdowns.”Annual growth rates amongst developing countries from 1960-1990 range from -2.7 percent to 6.9 percent.

There has been no obvious acceleration of growth in most developing countries, either relatively or absolutely, and no reversal in divergence. Almost nothing that is true about the growth rates of developed countries is true of that for developing countries.

North, D.C, “Epilogue: Economic Performances Through Time” in Empirical Studies in Institutional Change edited by L. Alston, T. Eggerston and D. North, pp 342-356 (USA: University of Cambridge Press, 1996)

Taken from here.

North is attempting to delineate what can and what cannot be learned about the way societies change over time. Section I is on the process of economic change, section II is on what questions we should ask and section III speculates on what questions can be answered and which cannot.

I

North explains that “a theory of economic performance through time would entail an integration of institutional change, demographic change and the change in the stock of knowledge.” In this essay he chooses to focus on the change of institutions because economics is the study of a process and processes are embodied in the institutions of a society.

Institutions are created by humans to structure human institutions in order to reduce uncertainty in pursuit of their goals (or those making the rules) in social, political and economic exchange.

Institutions are defined as the formal rules (constitutions, statute and common law, regulations etc.) , informal constraints (norms of behaviour, conventions, internally imposed codes of conduct etc.) and the enforcement characteristics of each.

Institutions are not Organisations. Think of Institutions as the rules of the game and Organisations as the players. “Organizations and their entrepreneurs are the actors; they will introduce new institutions or technology when they perceive that they can improve their competitive position by such innovation.”

North now goes into more detail on the processof institutional change.

The institutions of a period define what organisations will exist. Organisations exist under a condition of scarcity and therefore competition. The rate of innovation and change in the institutions which govern our organisations is governed by the incentive structure constructed by this competition.

This is not the competitive conditions of the economic theory of perfect competition but rather the institutional environment of the organizations–the framework of rules and norms–which determines the incentives for innovative activities. An improvement in an organisation is not necessarily an improvement in productivity but could be the creation of a monopoly or the redistribution of wealth in some advantageous way.

Sometimes the innovation involves a change in formal rules and structures [like the repeal of the corn laws] so a study of institutional change must take embody a theory of political change. Sometimes changes involve a gradual change in informal norms of exchange [like the end of religious prohibitions on usury].

Whether organisations change institutions in ways which boost productivity or by redistributing wealth depends on the incentive structure of currently existing institutions. If institutions and the way they evolve are the key to economic performance through time what determines the way they evolve?

The immediate answer is that individual entrepreneurs who are in the position of modifying the rules of the game in political or economic markets and have implicit or explicit theories about the consequences of policies act upon those theories to modify the rules to improve their competitive position; the perceptions of entrepreneurs shape their policies and over time it is the way these perceptions evolve that determines the way institutions evolve. There is no implication that results of the choices that are made will coincide with intentions; indeed more often than not the belief systems that underlie perceptions produce unintended and unanticipated results.

II

This approach to understanding economic performance through time is at odds with the mainstream literature.

Arnold Toynbee popularised the term “Industrial Revolution” in a series of lectures in 1880-81 and historians have ever since usually onsidered technological change to be the most important determinant for economic performance. For example “take off” theories of development. This is wrong, technologies give us our upper bound, but do not tell us about why this upper bound is so often missed. In contrast, Malthusian pressures have determined the gloomy lower bound.

The economic growth literature has seldom posed the questions which North wants answered. Growth accounting can explain the proportions with which human capital, physical capital, increasing returns, or technology contribute to economic growth but it cannot explain why poor countries don’t invest more in human or physical capital.

Studies of the Third World have often implicitly assumed incentives are aligned correctly, when they are almost always provide incentives for redistributive institutions are larger than those for productive activity. The failure of humans to organise themselves the provide the right incentives must be the centre of inquiry.

Too much study in economics looks at static equilibria, the study of economic performance through time needs a dynamic approach. Given the above, North now reveals his questions.

  1. Are institutions really the carriers of the process of economic change and if so what are institutions?
  2. If institutions play such a role how do they interact with the other key actors in the process of economic change, demographic change, and changes in the stock of knowledge?
  3. What are the sources of institutional change?
  4. What is the process of economic change? How useful are models drawn from evolutionary biology?
  5. How can we explain the diversity of economic performance through time?
  6. How far can we go in constructing a framework that can provide guidelines to improving the performance of third world and transition economies? Can we construct a dynamic theory of change?
  7. Where are we going?

III

In this section North  approaches each question in term.

Are institutions really the carriers of the process of economic change and if so what are institutions?

Mainstream economics neglects institutions. The evidence of the myriad levels of economic performance even amongst countries facing similar technological and demographic limits should illustrate how important institutions actually are.

However, while mainstream economics do not incorporate institutions into their theory, when they concern themselves with policy they do so in discussing changes in laws and regulations – formal institutions. But Informal institutions are also very important.

If institutions play such a role how do they interact with the other key actors in the process of economic change, demographic change, and changes in the stock of knowledge?

They interact in many ways, most of which we are yet to fully understand. Modern economic growth has its source in the stock of knowledge which is rooted in the scientific revolution of the sixteenth and seventeenth century, yet the roots of this revolution are far from clear.

The formal and informal institutions which led to this scientific revolution need to be understood to explain how it led to the massive changes in demographics and technology which followed.

What are the sources of institutional change?

The source of change reflects the perceptions of economic and political entrepreneurs who perceive ways in which they can improve their position.

In this context, actors do not act as neoclassical theory would suggest. This approach assumes pervasive scarcity and individuals making choices reflecting their preferences. The aggregate of this preference is then constructed  in the context of fixed resources, private goods and given technology. This model is good for illustration the benefits of a decentralised market system but is less useful in understanding institutional change.

When solving economic problems frictions arise [transaction costs] is the context of imperfect information and imperfect enforcement of agreements, and markets are the creatures of political forces. In the real world beliefs define the actions of actors.

We must model beliefs if we are to understand any social science.

Risk versus uncertainty comes into play when discussing someone’s beliefs. Risks can be described as a probability distribution and can be insured against. This is impossible for uncertainty and economics has not created a body of work on this subject. However, all human endeavour is conducted on the basis of some sort of uncertainty – religions, myths, taboos and half baked ideas all serve as the basis of (sometimes life and death) decision making.

The study of economic performance through time must entail the study of how humans learn and meld beliefs and preferences; why they develop these choices in the face of such uncertainty; and why some ideas die out and others prosper.

What is the process of economic change? How useful are models drawn from evolutionary biology?

There are parallels between Darwinian Evolution and the process of economic change. However, Institutional change is largely Lamarkian, change is intentional and is intended to improve the position of those making the changes.

Part of our the scaffolding on which society is built is genetic, part of being human, and part of it is cultural, also I guess part of being human, but in a different way.

Experimental Economists have found evidence which lends support to the position of evolutionary psychologist, human beings cooperate in small groups when transaction costs are small but noncooperative outcomes are favoured in large groups or under conditions of private information. Stephen J Gould and others have suggested that cultural evolution still has a large role to play in the architecture of how humans act. A look to the variety of human societies which share the same genetic material, suggests that cultural evolution play a large role.

Initially the architecture of the  structure is genetic, but interaction with the physical environment and those from the socio-cultural linguistic environment affect this. Categories of experiences are formed which become models on which we decide actions and predict outcomes, as we use these models we update them through confirmation and falsification.

No one individual can understand the whole world but each develops their own models. These models would diverge were it not for ongoing communications from those of a similar cultural background. The interaction of these models creates a culture, provides a method for intergenerational transfer, a means for internal communications, and a method to explain experiences outside the experience of our specific individual. This last function explains the helpes existence of irrational beliefs, some explanation is better than no explanation.

All this implies that individuals are constantly somewhat irrational, unknowledgeable and subject to experiences which may reinforce rather than dismiss incorrect beliefs. North proposes some more questions on what this means for the study of economic performance through time.

  1. What difference does it make that the agents fall far short of substantively rational behavior (full knowledge of all possible contingencies, exhaustive exploration of the decision tree, and a correct mapping between actions, events,and outcomes)?
  2. Is it possible that the agents simply get it wrong in terms of modeling the process of change or representations of the environment?
  3. It may be that the past experiences of the actors lock them in to a belief system and institutional framework that however well they have solved previous problems are strikingly bad at solving new problems.

How can we explain the diversity of economic performance through time?

History is a record of unanticipated consequences and outcomes of decisions made in the face of uncertainty. It could hardly be otherwise.

Economic History is the study of the huge increase in wealth and well-being of humanity, but is is also the study of actions which have produced death, war and famine on a colossal scale. Even what look today like the best laid plans (the US Constitutions) have in fact been aided hugely by chance.

One of the biggest challenges to economic growth for a society is the move from personal to impersonal exchange – a necessary component for greater specialisation and enlarged trade. For example, Genoese traders outperformed Islamic traders in the 11th and 12th century because the Islamic traders relied on in-group social communication networks to enforce collective action while the Genoese formed formal and legal enforcement mechanisms. Thus, due to path dependency, the Genoese could gain more from specialisation and enlarged trading networks.

Institutions change through time and impact one another in unpredictable ways. Because Islamic traders relied on personal exchange, they couldn’t specialise as much as the Genoese, which impaired change in the stock of knowledge which altered the path of demographic change which impacted the change of institutions etc.

How far can we go in constructing a framework that can provide guidelines to improving the performance of third world and transition economies? Can we construct a dynamic theory of change?

A theory of dynamic change is not possible in the same way that a theory of general equilibrium is. We make changes based on new information all the time. To predict those changes would require us to predict that future knowledge, at which point it ceases to be future knowledge and simply becomes knowledge and then becomes now. The past can inform the present and the future, but it cannot predict it.

We know something about the evolution of formal institutions but we know very little about how informal rules change, and these can be just as important.

We need to understand path dependency because it plays a major role in constraining change, if institutions exist which retard economic growth then we need to know hoe easy it is to change them.

Where are we going?

The foregoing discussion suggests that our potential foresight is relatively limited. Forecasting what humans will learn and how the human environmental landscape will change in consequence of that learning and non-human alterations is beyond our capacity and in consequence imposes severe temporal limits on our understanding of economic performance in the future.

Welcome to Global History @ LSE

This is the blog of a student taking the Global History MSc at the London School of Economics.

I am studying part time from October 2010 to September 2012 and I will be posting my lecture notes, seminar notes, reading notes and essays online.

This is for my benefits so I can revise wherever I am but is open to anyone curious about the course, whether they’re currently studying at LSE or thinking about signing up.

LecturesLecture in the New Theatre, c1981 by LSE Library.

SeminarsDr Peter Loizos (left) and students, c1981 by LSE Library.

ReadingStudent in the library, 1981 by LSE Library.

EssaysStudent in the library, 1981 by LSE Library.

You can see my lecture notes etc by clicking on the pictures above. Browsing by courses is also available if you use the links below.

All images are taken from the LSE archive on Flikr. This site has no official link to the London School of Economics and Political Science. This site cannot verify the content of external links. Some rights reserved under a Creative Commons Attribution-NonCommercial 3.0 Unported License.