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Institutional Change and American Economic Growth: A First Step Towards a Theory of Institutional Innovation


  • Davis, Lance
  • North, Douglass


This paper attempts to provide an explanation of the formation and mutation of economic institutions. It is specifically concerned with that process as it has developed over the past one hundred and seventy-five years of American history, but with appropriate changes the model might be used to predict institutional change in the future and to explain institutional change in other nations and in other eras. Like more traditional theory, the model has been formulated in a manner that makes it in principle operational, although we admit that it predicts relatively little. Profit maximization is the motivating force, and in this sense too the model fits into the stream of neo-classical economics, although like the macro models of Keynes its subject has not traditionally been considered a part of that discipline. Finally, we admit that the theory is at some points woefully weak and the explanations at times incredibly simplistic. The work, however, does, we feel, represent a first step towards a useful theory of institutional change.

Suggested Citation

  • Davis, Lance & North, Douglass, 1970. "Institutional Change and American Economic Growth: A First Step Towards a Theory of Institutional Innovation," The Journal of Economic History, Cambridge University Press, vol. 30(1), pages 131-149, March.
  • Handle: RePEc:cup:jechis:v:30:y:1970:i:01:p:131-149_07

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    Cited by:

    1. Bergh, Andreas & Bjørnskov, Christian, 2019. "Does Economic Freedom Boost Growth for Everyone?," Working Paper Series 1276, Research Institute of Industrial Economics.
    2. Saima SARWAR* & M. Wasif SIDDIQI**, 2018. "AN ATTEMPT TO CRYSTALIZE THE BLACK-BOX MYSTERY: Institutional Quality or Constitutional Rights," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 28(1), pages 103-130.
    3. Guoqiang Tian, 2001. "A Theory of Ownership Arrangements and Smooth Transition," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(3), pages 380-412, September.
    4. Sokile, C. S. & Mwaruvanda, W. & van Koppen, Barbara, 2005. "Integrated water resource management in Tanzania: Interface between formal and informal institutions," IWMI Books, Reports H038764, International Water Management Institute.
    5. Nataliia Honcharenko-Zakrevska & Mykhailo Goncharenko & Liudmyla Osipova, 2020. "Predictive Analysis Of Research Of The Institutional Aspects Of Market Environment Distortions," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 6(1).
    6. Sokile, C. S. & Mwaruvanda, W. & van Koppen, Barbara, 2005. "Integrated water resource management in Tanzania: Interface between formal and informal institutions," Book Chapters,, International Water Management Institute.
    7. Head, Thomas, 1981. "Modeling Institutional Change in Rural Egypt," Working Papers 232846, University of California, Davis, Agricultural Development Systems: Egypt Project.
    8. Peter Stolz, 1983. "Das wiedererwachte Interesse der Ökonomie an rechtlichen und politischen Institutionen," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 119(I), pages 49-67, March.
    9. Griffith, David A., 2010. "Understanding multi-level institutional convergence effects on international market segments and global marketing strategy," Journal of World Business, Elsevier, vol. 45(1), pages 59-67, January.
    10. repec:ags:ucdegw:232846 is not listed on IDEAS
    11. Peter Gordon & Lanlan Wang, 2004. "Does Economic Performance Correlate with Big Government?," Econ Journal Watch, Econ Journal Watch, vol. 1(2), pages 192-221, August.
    12. Swain, Braja Bandhu, 2008. "The role of contract farming in agricultural development in globalise world: an institutional economics analysis," MPRA Paper 18683, University Library of Munich, Germany, revised 14 Sep 2009.
    13. Rei, Claudia, 2011. "The organization of Eastern merchant empires," Explorations in Economic History, Elsevier, vol. 48(1), pages 116-135, January.
    14. Gérard Grellet & Naîma Grellet, 1999. "Développement des marchés et coûts de transaction. Une critique des politiques économiques libérales," Revue Tiers Monde, Programme National Persée, vol. 40(157), pages 37-49.
    15. Jiří Schwarz, 2005. "The Economic history and the economics
      [Hospodářské dějiny a ekonomie]
      ," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2005(3), pages 152-162.
    16. Kirill Sablin, 2014. "Features of formation of «developmental institutions» in Russia: a case of the Siberian regions," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(1), pages 165-174.
    17. Winands, Sarah & Holm-Müller, Karin, 2014. "Eco-regional Cartels on the Genetic Resource Market and the case of the Andean Community's legislation," Discussion Papers 163046, University of Bonn, Institute for Food and Resource Economics.
    18. Marek Piosik, 2018. "Mainstreams of research on institutional change in the multidimensional viewpoint," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 17(3), pages 289-287, September.
    19. Fathollahi & Farshad Momeni & Nasser Elahi & Seyyed Mohammad Sajjad Najafi, 2017. "Appropriate theoretical framework for understanding and analyzing economic issues in knowledge-based economy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(3), pages 957-976, September.
    20. Griffith, David A. & Yalcinkaya, Goksel & Calantone, Roger J., 2010. "Do marketing capabilities consistently mediate effects of firm intangible capital on performance across institutional environments?," Journal of World Business, Elsevier, vol. 45(3), pages 217-227, July.
    21. Qingrui Xu & Jin Chen & Zhangshu Xie & Jingjiang Liu & Gang Zheng & Yong Wang, 2007. "Total Innovation Management: a novel paradigm of innovation management in the 21st century," The Journal of Technology Transfer, Springer, vol. 32(1), pages 9-25, April.
    22. Steven Dahlquist & David Griffith, 2015. "A framework for the formation of governance portfolios in international interfirm marketing collaborations," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 5(1), pages 45-59, June.
    23. Steven H. Dahlquist & David A. Griffith, 2015. "A framework for the formation of governance portfolios in international interfirm marketing collaborations," AMS Review, Springer;Academy of Marketing Science, vol. 5(1), pages 45-59, June.
    24. Preston, Courtney & Goldring, Ellen & Berends, Mark & Cannata, Marisa, 2012. "School innovation in district context: Comparing traditional public schools and charter schools," Economics of Education Review, Elsevier, vol. 31(2), pages 318-330.
    25. Helge Peukert, 2001. "Bridging Old and New Institutional Economics: Gustav Schmoller and Douglass C. North, Seen with Oldinstitutionalists' Eyes," European Journal of Law and Economics, Springer, vol. 11(2), pages 91-130, March.

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