Bad Institution

1006 Words5 Pages
That of institutions is a topic that has been broadly discussed throughout history. Economists’ main works and researches were aimed at giving a unique definition of what those entities are, at investigating the extent to which an institution can be said to be a “good” or a “bad” one, and at understanding both the way institutional change took place, and the role institutions play in the economic development of different countries. According to North (1990) for example, institutions are “humanly de-vised constraints that structure political, economic and social interactions”. They include formal and informal rules together with their enforcement mechanism, provide a structure to the everyday life, thus reducing uncer-tainty, and define and…show more content…
For example Acemoglu and Rob-inson, who write that “Institutions are the fundamental cause of economic growth and development differences across countries”, or Bogart. The lat-ter’s main focus is on the growth of a country’s economy brought about by institutional change in the long run. Institutional change is another fun-damental issue: it is about the introduction of new institutions which re-place old ones, and it can be due to many factors (such as government de-crees, or market-led processes). According to North, bad institutions are eventually replaced by good institutions, however there is evidence of the persistence of bad institutions in many different countries. As Persson (2010) says: “a common mistake made by economists and historians alike is to ascribe efficiency characteristics to institutions because they are pervasive and long-lived”. Indeed, bad institutions can last a long time, and this happens because they serve the interest of specific social groups. This phenomenon is well explained by Acemoglu and Robinson, who claim that, in many cases, institutional changes are difficult to achieve because of the linkage between political and economic institutions through the distribution of political power. Their idea is that institutions are typically chosen by those who hold political power, and whose main aim is that of maximizing their own welfare and…show more content…
It was a wide spread system regulating soci-eties in the Middle Ages in which serfs and their families were tied to a specific land and dependent on their feudal lord. They had to cultivate the land and they enjoyed customary rights and provision of public goods, such as justice and protection, but on the other hand they were subject to legal restrictions and degrading social status. Manorialism was the eco-nomic system prevailing at the time, the manor was the central unit in which administrative, legal and economic activities took place and in which the lord lived. Because of the lack of a central authority, the power was in the hands of the lords of the different manors, and since this spe-cific institution was set up according to their own interests, an institu-tional change was hard to access. However population growth and land shortage were the starting points of a process that led to the dissolution of serfdom in Western Europe, since as opportunity income fell, landlords were able to negotiate with peasants, who were untied from the previous bonds and who gained rights on their land. The dissolution of serfdom “was a spontaneous market-led process”. [idea of serfdom for north and

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