Abstract
Krul gives a systematic overview of Douglass North’s New Institutionalist Economic History. He describes how North turned from early Marxist leanings to neoclassical methods in economic history, only to again abandon his previous thought and adopt the approach of New Institutionalist Economics. Krul then outlines the stages of the development of North’s theory in chronological order, emphasizing how each stage emerged to compensate for theoretical gaps in the previous one. The guiding thread is North’s early confrontation with the ideas of Karl Polanyi. As Krul shows, it was the research agenda North developed to refute Polanyi that drove all his subsequent thought. The chapter provides a clear summary of the core concepts of North’s approach and the main publications from which they derive.
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Notes
- 1.
- 2.
It is striking that North as late as 2009 averred that “Marx … was a big influence on my life, and it still is. I’m not a Marxist any more, but still, he had an enormous impact” (North 2009: 160). Yet in his published work, he very rarely referred to Marx. This illustrates how in North’s work the explicit references and arguments often hide deeper theoretical concerns and intellectual dialogue beneath the surface.
- 3.
This remained so throughout his life. One can easily imagine an alternative course of events where North would have become a famous photographer instead—“there but for path dependence go I”.
- 4.
He returned to this topic once subsequently (North 1968); see also below. How North’s historical works on maritime trade may have affected subsequent studies of oceanic trade and exchange, a popular topic in global history and related fields, is worth a study in its own right. I thank Laleh Khalili for drawing my attention to their significance.
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North’s argument here refers for this theoretical background to Furubotn and Pejovich (1972).
- 7.
At this stage of his work, when his NIEH has not yet properly come into existence but is being formulated as a course for future inquiry, it is interesting to note that demographic change and household behavior affecting it are repeatedly invoked as potentially important variables. Unlike the others mentioned above, these factors disappear rather rapidly from view in North’s subsequent work. For the sake of a clear explanation, I therefore give them short shrift in the discussion in this chapter. But lest I give the impression of a Whiggish account of inevitable progress to North’s project, I want to point to these here as one of various topics that North invokes at different stages in his intellectual trajectory, only to virtually ignore them subsequently. The same goes to a lesser extent for military technology, mentioned in North (1974: 6), which periodically returns in considerations on ‘violence’.
- 8.
These ‘recent extensions’ refer primarily to the foundational literature on property rights and early public choice theory of the 1950s and 1960s.
- 9.
This odd combination of ambition to bypass heterodox explanations and modesty about the actual quality of the alternative offered appears elsewhere too. For example, Davis and North’s 1970 paper is described by its own authors as “at some points woefully weak and the explanations at times incredibly simplistic” (Davis and North 1970: 131). This strengthens my interpretation that the point was to develop a theory, any theory, that could defeat ‘external’ challenges to the choice theory-based approach in economics. The difficulty was finding the right formulation of the problem, for which North needed Polanyi’s challenge, as described below.
- 10.
A recent informal study estimated that only 3% of economists at high-ranking US departments have read Karl Polanyi, according to their own reporting (Grdesic 2016).
- 11.
Exceptions are Davis (2008) and Didry and Vincensini (2011). However, Davis’ paper is much more limited in scope than the present work. Didry and Vincensini’s working paper, although apt, rather all too readily assumes that North’s NIEH is indeed an effective answer to Polanyi as North claimed. As demonstrated in this book, that assumption is not safe.
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- 13.
There is still an element of optimism in his response that “I wish to make the affirmative point that as yet we have not even tried to see how far economic analysis will take us in explaining institutional arrangements. (…) Transaction cost analysis is a promising framework to explore non-market forms of economic organisation” (North 1977: 709). But equally clear is his sense that this is the last lifeline for ‘economic analysis’ in solving these problems, since neoclassical economics and Cliometrics have failed and the outside critics, like Polanyi , stand ready to provide noneconomic solutions.
- 14.
At least in subsequent interpretations in the recent ‘Polanyi revival’ it has been the most important concept, even if Polanyi exegesis has been conflicted about its importance in Polanyi’s original works. The revival of this concept probably owes much to its use in New Economic Sociology; see Granovetter (1985).
- 15.
In his (hostile) review of Polanyi’s The Livelihood of Man (Polanyi 1977), referred to above as the likely origin of North’s encounter with Polanyi , North describes Polanyi’s stance as “to attack a choice theoretic approach in societies where custom and tradition eliminate choice” (North 1978: 398).
- 16.
Intriguingly, at the time this book was seen as heralding a third stage in North’s own career—after his neoclassical and then neoclassical-institutionalist phases (Galenson 1983: 188). This merely proves that what counts as a stage can only be a retrospective construct, determined as much by the research interest of the intellectual historian or reviewer as by texts themselves.
- 17.
An early sign of the noncomprehension of North’s new direction is provided by one reviewer of this book, who saw it as nota bene a “useful complement to recent attempts… by Perry Anderson and Immanuel Wallerstein” (Millward 1983: 964).
- 18.
North now explicitly contrasts his view on this point with the NIE tradition of Oliver Williamson and others (North 1981: 7). This underlines that by this point the NIEH has really become something of its own.
- 19.
Something North acknowledges (North 1981: 68).
- 20.
- 21.
In this chapter, however, the emphasis is on the role of organizations as agents. The individual ‘entrepreneur’ in the ‘political market’ is mentioned, but their role has not yet developed in detail.
- 22.
It is this distinction that makes Didry and Vincensini (2011), already referred to above, argue that North successfully answered Polanyi’s challenge. For them, this distinction makes it possible to see both market and nonmarket phenomena as part of an ‘institutional matrix’ in a dynamic process, which then gives a theoretical framework for explaining historical change in Polanyian modes of integration. As we will see, I think this judgment is too optimistic and too simple.
- 23.
One of the characteristic attributes of the neoinstitutionalist turn in economic thought as well as elsewhere has been the resurgence in popularity of ‘culturalist’ explanations for economic and institutional divergence. Some new institutionalist (or adjacent) authors have in recent years been quite successful in supporting these old ideas on the basis of new theoretical formulations, and North in turn cited their work. Some examples favored by North are those of Avner Greif (1994) and Timur Kuran (1986, 1997, 2003), as well as older theories about the interaction between ideas and technological change like those of Lynn White (1978). These provide an interesting contrast to recent new institutionalist publications which emphasize institutions instead of culture, such as Acemoglu and Robinson (2012). A more thorough analysis of this potential split in the neoinstitutionalist turn awaits a separate publication, however.
- 24.
VSO’s approach builds on a model developed first in North and Weingast (1989). The authors mention Olson’s model, but differentiate themselves from it, in that they view ‘the state’ as composed of multiple internal agents or organizations, rather than being a single actor as in Olson’s model (North, Wallis, and Weingast 2009: 17). The sophistication of VSO rests in depicting the state as the equilibrium outcome of elite action, rather than as simply being the actor itself. Another comparable model is Barzel (2000).
- 25.
Indeed Hobbes is explicitly invoked (North, Wallis, and Weingast 2009: 13), but the point is made that the analysis in VSO offers a way out of Hobbes’ state of nature.
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Krul, M. (2018). North’s NIEH in Historical Overview. In: The New Institutionalist Economic History of Douglass C. North. Palgrave Studies in the History of Economic Thought. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-94084-7_2
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