Economic growth would become more common if more countries changed their institutions. - Institutions and Growth Miracles Revisited
- Economic growth would become more common if more countries changed their institutions.
- Where do institutions come from?
- Culture?
- History?
- Geography?
- Luck?
- How can they be changed?
Check Yourself - List the five institutions that promote economic growth.
- In England during the Wars of the Roses (late 1400s), two parties fought for the crown. Contrast the prospects for economic growth during this period and after this period when Henry VII became the unquestioned head of the country.
Check Yourself - When the pilgrims landed at Plymouth Rock, they established a system of collective farming in which all corn production was shared. Given your understanding of incentives, what do think happened to the Pilgrims?
Takeaway - Economic growth has resulted in GDP per capita today being 50 times higher in the rich countries than in the poorest.
- Economic growth has lifted billions out of near-starvation poverty but billions still remain in dire poverty.
- Poor countries can catch up to the rich countries in a surprisingly short period of time.
- Accumulation of human and physical capital is key but not sufficient.
Takeaway - Countries with institutions that encourage the efficient use of human and physical capital will succeed.
- These institutions are:
- Property rights
- Honest Government
- Political stability
- Dependable legal system
- Competitive and open markets.
End of Chapter 7
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