Institutional Change--SSP Chart of North transaction cost cases

Situation -------------------------Structure ------------------------------------Performance

All kinds of interdependencies-mainly IUG pre-industrial.

Trans. Cost.

Path dependence-Cumulative Causation

Constitutional rules for making workaday rules. Perception (subjective models) of unrealizable opportunities so individuals & organizations try to change institutions.

1. England: Parliament

2. Spain: Centralized bureau-

racy. New business class not represented. (Spanish colonial heritage?)

1. Magna Carta

Merchant fairs; enclosures; freemen in cities; peasants got right to traditional rents; court enforcement of contract; Mill Dams act destroyed agrarian interests--

"Lowered the cost of acting on one's ideas" for mill dams;

Joint-stock co.& capital mobility and debt; patent law; insurance to spread risk.

Which are productive and which rent seeking?


2. Feudal aristocrats maintained rights vis a vis peasants and business.

Rules which apply to a class are HEC within the class. Organizations Try to overcome free riders.
Cost of protecting rights 1. England-King gave rights in exchange for finance.

2. Spain- confiscated existing property to pay state expenses.

1. More investment and faster growth.

2. Less investment and slower growth.

North- "Stories of stability and change go to the heart of the puzzle about the human economic condition." 130