The Persistence of Institutions

After the election, this photo started making the rounds on Facebook. There's an even more detailed version out there as well, but this gets the basic story across.



The map is a great example of "the persistence of social and economic institutions," a term that is commonly found in the work of Acemoglu and Robinson. The most accessible versions of this idea can be found in the books Why Nations Fails or The Economic Origins of Dictatorships and Democracy. Interest readers might also want to check out check out Institutions, Institutional Change and Economic Development by Douglass C. North. Unfortunately, it's hard to find a digital copy of the North book (or any of his books for that matter). It might just want to take a look at Economic Performance through Time, a publicly available article he wrote on the topic.

Anyway, on to institutions. Let's start with a definition, this comes from North:

Institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interactions. In consequence, they structure incentives in human exchange, whether political, social or economic. Institutional change shapes the way societies evolve through time and hence is the key to understanding historical change.

If institutions are the rules of the game, organizations are the players. While organizations develop and must act within the institutional framework of a society, they also have the potential to shape institutions as well.

We need these two things because the world is a complex place and the challenges we face are larger than what one person can solve. By establishing informal and formal constraints on behavior, institutions give us clear guidelines on how we should act and interact with each other. It doesn't matter too much whether these rules are explicit (in laws) or implicit (in norms), since both guide and direct behavior in ways that is beneficial to us and socially desirable.

Trade is a good example. Many anthropological researchers have found that pre-modern societies often have elaborate rituals in place before beginning any trading session. These are designed to reduce the threat that one side would kill each other. This would be an instance of institutions (here the rules from the ritual) guiding behavior in a collectively beneficial manner.

Although institutions change, they are often very stubborn. This is especially true of extractive economic institutions that are designed to channel the effort of the masses towards the benefit of a limited few. By creating political institutions that are exclusive (and political and economic institutions reflect one other), an elite can use the government along with less explicit forms of power to transfer wealth upwards. These systems tend to persist over time because they give people incentives to stay at the top. Politics may change the elite, but the system rewarding the elite remains essentially unchanged.

Acemoglu and Robinson argue that this is why you see remnants of feudalism is Russia persisting to this very day. This is why Mexico continues to have corrupt elections favoring its elite (something that I remember you posted about recently), and this is why the South continues to favor a distinct set of economic and political policies that favor rich white men over any other group. All of these modern behaviors reflect long-standing institutions that stretch all the way back to their serf-, colonial- and slave-filled pasts.

It's also a good reminder that change, while possible, remains hard. It takes much more than simply changing the politics of today; you must change the institutional framework too. It makes sense why you would be frustrated with "things always staying the same," since the institutions are not shifting much just because we elected some new guy.

Maybe I'm too much of an optimist, but this election is exciting because I see the potential for institutional change. You major social policies about to go into place (Obamacare being number one), along with a significant demographic change and a badly discredited reactionary counter-ideology (the Rove meltdown will be airing in the Quinn residence regularly for the next several years). There's hope that we can now see the kind of generational shifts that can continue to provide more social, political and economic inclusion for many years to come.