Douglass North

Douglass Cecil North was born in Cambridge, Massachusetts, on 5 November 1920 and died in Benzonia, Michigan, on 23 November 2015. He studied at the University of California, Berkeley, served as a navigator in the merchant marine during the Second World War, and completed his doctorate at Berkeley in 1952. He taught at the University of Washington for many years, where he was a leader of the 'cliometric' revolution that applied economic theory and statistics to history, and from 1983 at Washington University in St. Louis.

In 1993 he shared the Sveriges Riksbank Prize in Economic Sciences with Robert Fogel 'for having renewed research in economic history by applying economic theory and quantitative methods in order to explain economic and institutional change'. He was a founder of the International Society for New Institutional Economics.

• Institutions as rules of the game. 'Institutions are the humanly devised constraints that structure political, economic, and social interaction.' They include informal constraints (customs, taboos, codes of conduct) and formal rules (constitutions, laws, property rights), together with their enforcement. Organisations — firms, parties, churches — are the players.
• Transaction costs. Institutions matter because exchange is costly: measuring what is traded, enforcing agreements and protecting rights consume resources. Institutions that lower these costs allow specialisation and impersonal exchange.
• Path dependence. Institutions evolve incrementally, and choices made in the past constrain the options available later. Inefficient institutions can persist for long periods because the organisations that benefit from them have the power to defend them and because beliefs and mental models change slowly.
• The state's dilemma. A state strong enough to protect property rights is also strong enough to confiscate them. In 'Constitutions and Commitment' (1989) North and Barry Weingast argued that after the Glorious Revolution of 1688 England's new constitutional settlement — parliamentary control of finance and an independent judiciary — made the Crown's promises credible, lowering the cost of government borrowing and supporting the growth of capital markets.
• Limited and open access orders. In Violence and Social Orders (2009), with John Wallis and Barry Weingast, North argued that most societies are 'limited access orders' in which elites contain violence by sharing rents and restricting the right to form organisations. A few have made the transition to 'open access orders' in which anyone meeting impersonal criteria can form organisations, and political and economic competition reinforce each other.

North is a founder of new institutional economics and one of the most cited authors in the study of development, constitutions and state capacity. His framework underlies the argument, developed by Daron Acemoglu, Simon Johnson and James Robinson, that inclusive institutions explain prosperity, and it shaped the World Bank's and other donors' attention to governance and the rule of law from the 1990s.

For governance design North offers several lessons: that formal rules work only when they are consistent with informal norms and enforcement; that credible commitment — binding rulers to keep their promises — is a central design problem; that reforms copied from elsewhere often fail because they ignore path dependence and local beliefs; and that transitions to open access depend on elites finding it in their interest to make rights impersonal. These ideas are directly relevant to charter cities, special economic zones and new polities that try to import institutions wholesale.

• Efficiency bias. Earlier work, especially The Rise of the Western World, was criticised for implying that institutions evolve towards efficiency; North himself later emphasised that inefficient institutions can persist.
• The 1688 thesis. Historians and economic historians have challenged the North–Weingast account. Nathan Sussman and Yishay Yafeh (2006), for example, found that British interest rates remained high and volatile for about four decades after 1688 and that Britain did not borrow more cheaply than countries with weaker protection of property rights.
• Vagueness. Critics argue that 'institutions' is used so broadly — from laws to beliefs — that the theory risks explaining everything and predicting little, and that it is hard to separate institutions from geography, culture or human capital.
• Eurocentrism. The framework has been criticised for treating Western European and North American trajectories as the benchmark for open access.

• The Rise of the Western World: A New Economic History (1973, with Robert Paul Thomas)
• Structure and Change in Economic History (1981)
• 'Constitutions and Commitment' (1989, with Barry Weingast), Journal of Economic History — DOI
• Institutions, Institutional Change and Economic Performance (1990) — Cambridge University Press
• 'Institutions', Journal of Economic Perspectives (1991) — DOI
• Violence and Social Orders (2009, with John Wallis and Barry Weingast) — Cambridge University Press