Feb 17, 2014

Adam Smith's and Douglass North's Multidisciplinary Approach to Economic Development

From an excellent paper by Kwangsu Kim in the The American Journal of Economics and Sociology (Jan. 2014):
Finally, it requires notice that with regard to the same stories just observed North recently proceeded to add an integral linkage between cultural artifacts and economic development (North 2005: 44, 135–145). North claimed that the success of Western Europe and the United States is based on a “competitive decentralized environment” with a flexible institutional structure and “modern perceptions of freedom,” which were created by the combined forces of “Christian dogma” and English “individualistic behavioral beliefs.” In contrast, why Spain and Latin America were slow to growth lay in an “absolutist,” “centralized monarchy and resultant bureaucracy” and “the evolution of the belief structure in ways that reinforced the existing institutional structure and stifled both economic growth and political/civil freedoms” (North 2005: 137, 144–145).
The abstract:
This article aims to point out Adam Smith's and Douglass North's multidisciplinary approach to economic development and history. Based on a philosophical link of methodological issues, Smith and North shared a conceptual framework and explanatory principles in common as well as similar historical illustrations. In terms of the use of comprehensive and integrated models of society, politics, and economy, they presented that economic development relies on how far congenial both institutional environments and sociocultural values of justice, liberty, security, and equality are to economic agents, allowing the interplay between economic performance and polity/culture. Meanwhile, these suggest a bridging role between old and new institutionalism, and, more importantly, a revival of Smithian moral philosophical tradition in the history of economics. 
It is amazing how much ground Adam Smith covered. Many of his arguments are the basis for large traditions in modern economics.  

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