Institutions and economics

Edward Glaeser, Giacomo Ponzetto, 18 September 2017

Psychologists have long documented that we over-attribute people's actions to innate characteristics rather than to circumstances. This column shows that when we commit this ‘fundamental attribution error’ as voters, we over-ascribe politicians´ success to personal characteristics that merit re-election. Although this mistake can improve politicians’ incentives in ordinary times, the theory also explains lack of institutional reform and poor institutional choices, such as decreased demand for a free press and preferences for dictatorship.

Cevat Giray Aksoy, Francesca Dalla Pozza, Ralph De Haas, 17 August 2017

Since the fall of the Iron Curtain in 1989, post-communist countries have experienced an overhaul of their economic and political institutions. This column highlights five core messages from the most recent Life in Transition Survey, which is conducted periodically by the EBRD and the World Bank to monitor how the transition process impacts people’s perceptions and attitudes. Understanding the process is important as personal experiences largely determine whether people (continue to) support the economic and political institutions that underpin their society.

Stephen Broadberry, John Joseph Wallis, 05 July 2017

Most analysis of long-run economic performance abstracts from short-run fluctuations and seeks to explain improved performance through an increase in the rate of growth. Using data on annual rates of change of per capita income reaching back to the 13th century for some countries, this column show that improved long-run performance has actually occurred primarily through a decline in the rate and frequency of shrinking. Structural change, technological change, demographic change and the changing incidence of warfare offer at best a partial explanation; a full understanding requires a consideration of institutional change.

Neil Monnery, 30 June 2017

Post-war Hong Kong delivered one of the most dramatic improvements in living standards in history, a transformation regarded by Milton Friedman as an experiment in the potential impact of economic freedom on economic growth. This column assesses the contribution of one key official – finance minister Sir John Cowperthwaite – whose laissez-faire approach of ‘positive non-interventionism’, much admired by Friedman, underpinned that success. It also explores, 20 years on from the handover to China, whether a second stage of the Hong Kong economic experiment might be in progress, perhaps leading to faltering freedom and faltering growth.

Ravi Kanbur, 13 June 2017

With the World Bank now far from the only game in town in providing development finance, this column argues that it should focus on issues which are truly global in scope, but questions the suitability of the World Bank’s signature instrument, the sovereign loan. The international community does rely on the Word Bank for one global public good – global consensus building – but the current situation of veto power in the hands of a US government which does not acknowledge global public good issues, as evidenced by its withdrawal from the Paris accord, is potentially lethal for perceived and actual independence in consensus building.

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