A. Przeworski

Government and Opposition 2004

 A Summary

In a Nutshell

The logic of collective action implies that institutions are needed for the type of cooperation that enables a country to develop beyond the type of society based on family and small clans. Ostrom shows that institutions lower the cost of monitoring and enforcing agreements. However, Putnam then goes on to show that in order to explain the existence of institutions we have to look to the foundational civic traditions and social capital. Thus as North argues there are two key propositions to the theory of new institutionalism:

  1. Institutions Matter – they influence norms of belief and action and shape outcomes
  2. Institutions are endogenous inasmuch as their form and function depend upon the conditions under which they emerge and endue.

 Yet, if conditions shape institutions and institutions transmit the causal effects of these conditions how do we distinguish the effects of institutions separately from the conditions which gave rise to them? In other words, how is the problem of reverse causality overcome? Only by answering this question can we judge the effectiveness of implanting institutions into some particular conditions in the hope that they will function in the same way that they did elsewhere. Is it the institutions or the conditions that matter?

 For example we may observe the growth rates of Zaire under a dictatorial rule and question whether the growth would have been different had it experienced democracy. And yet it is only possible to observe one state of the world, thus counterfactuals are created to re-create the same conditions of Zaire under democracy. Yet there is no way to determine if the counterfactuals are valid

 This implies that projects of institutional reform must take as a point of departure the actual conditions not blueprints based on institutions that have been successful elsewhere. It is also important that institutions reflect the basic power structure of society otherwise they will not be “self-enforcing”.

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