The Review of Austrian Economics

, Volume 26, Issue 4, pp 375–381 | Cite as

The Institutional Revelation: A comment on Douglas W. Allen’s The Institutional Revolution

Article

Abstract

Institutions are a central topic in economic history. Allen’s work differs in that he is interested in institutions per se, not as a means to economic performance and prosperity. The purpose of this book is to explain the institutions of the premodern world and to show why they changed. His argument is that in a Principal-Agent situation, before the Industrial Revolution, it was harder for the Principal to attribute whether the failure of the project was due to acts of nature or some acts of the agent, hence the “strange” institutions. In a modern world, with a much improved monitoring technology, we can use more “efficient” institutions, hence the Institutional Revolution. Although innovative and interesting, the author over-stresses his argument. Much more than monitoring in a principal-agent relationship is needed to explain the Industrial Revolution and the changes in institutions associated with it.

Keywords

Institutions Technological change Innovation Monitoring Moral hazard 

JEL codes

B15 D72 N23 N43 

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Departments of Economics and HistoryNorthwestern UniversityEvanstonUSA
  2. 2.Eitan Berglas School of EconomicsTel Aviv UniversityTel AvivIsrael
  3. 3.Department of EconomicsNorthwestern UniversityEvanstonUSA

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