Douglass North, New Institutional Economics, and Complexity Theory

Douglass North was central to the emergence of New Institutional Economics. Less well known are his later writings where he became interested in complexity theory. He attended the second economics complexity conference at the Santa Fe Institute in 1996 on how the economy functions as a complex adaptive system, and in his 2005 Understanding the Process of Economic Change incorporated this thinking into his argument that market systems depend on how institutions evolve. North also emphasized in the 2005 book the role belief played in evolutionary processes, and drew on cognitive science, especially the famous ‘scaffolding’ idea of cognitive scientist Andy Clark – the idea that the brain and the world ‘collaborate’ to address our computational and informational needs. This chapter discusses how North’s thinking about institutions and change reflected these later investigations. It concludes with comments on his late thoughts about the problem of violence.