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This book offers a comprehensive assessment of Douglass North’s contribution to economics and the social sciences by examining the origins and structure of his New Institutionalist Economic History (NIEH). Informed by contemporary debates in the philosophy of economics, Krul describes the evolution of North’s theory from mainstream economics to an increasingly heterodox form of New Institutionalism. He also examines what North's original aims were in developing the NIEH research programme and how well it has achieved these aims. By exploring major themes in North's NIEH, with an emphasis on the final stage of his theory, Krul sheds new light on the strengths and weaknesses of North's work. He also discusses the implications of this critical interpretation for the New Institutionalism in economics and other fields of social science.



1. Introduction: Douglass North’s NIEH in Context

The economic historian Douglass North is most famous for developing a theory that interprets the causes of economic change by explaining them in terms of social institutions. This theory, the New Institutionalist Economic History, has had a far-reaching influence. In this chapter, Krul explains how this theory originated in existing institutionalist ideas within economics, how it built on these ideas and developed them further, and how it contributed to the rise of a new way of thinking across the fields of social science concerned with economic thought. Krul also discusses the reception of North’s theory, both by its supporters and its critics. As shown here, for understanding North’s approach it is important to distinguish the specifics of his theory from other forms of New Institutionalist Economics.
Matthijs Krul

2. North’s NIEH in Historical Overview

Krul gives a systematic overview of Douglass North’s New Institutionalist Economic History. He describes how North turned from early Marxist leanings to neoclassical methods in economic history, only to again abandon his previous thought and adopt the approach of New Institutionalist Economics. Krul then outlines the stages of the development of North’s theory in chronological order, emphasizing how each stage emerged to compensate for theoretical gaps in the previous one. The guiding thread is North’s early confrontation with the ideas of Karl Polanyi. As Krul shows, it was the research agenda North developed to refute Polanyi that drove all his subsequent thought. The chapter provides a clear summary of the core concepts of North’s approach and the main publications from which they derive.
Matthijs Krul

3. Markets, the Social Contract, and the ‘Smithian Result’

The purpose of this chapter is to explain the role of the market in Douglass North’s thought. As Krul shows, while North was not a straightforward free market theorist, he nonetheless idealized a certain view of the market and used it as a benchmark for analyzing all historical societies. While also discussing earlier criticisms of North’s approach, Krul points to the importance of social contract theory and a pessimistic outlook on social cooperation as sources for North’s idealization of markets. An important part of the discussion is the role of Adam Smith, who functions for North as proof of both the virtues of well-ordered markets and of the difficulties of achieving them.
Matthijs Krul

4. Players of the Game: Rationality, Choice, and Indeterminacy

One of the core elements in all of Douglass North’s work is his view of economic agents as ‘players of the game’ and institutions as the ‘rules of the game’. This chapter systematically analyzes how North uses these terms and in what ways he justifies this usage. As Krul argues, underlying this conception is an implicit game theoretical view of human society as a set of strategic interactions. However, for such models of social behavior to work, some fairly exacting technical criteria of rationality must be met. As Krul shows, North’s approach does not meet these, instead revealing fundamental ambiguity about just how rational agents are supposed to be. The result is that the ‘players of the game’ approach becomes indeterminate.
Matthijs Krul

5. North’s Theory of Cultural Evolution

In the final stages of his New Institutionalist Economic History, Douglass North developed an elaborate theory of cultural evolution. Drawing on the work of Hayek, North sought to explain where institutions come from and how humans can cooperate sufficiently to produce and sustain them. In this chapter, Krul provides for the first time a systematic discussion of this theme in North’s work. As he shows, North rejected Hayek’s theory of spontaneous order, preferring to see culture as a unique case of an intentional evolutionary process, but one brought about by biologically given limits on our cognitive abilities. However, North’s attempt to find a non-Darwinian process of cultural evolution is insufficiently grounded in an understanding of evolutionary concepts to be viable or to explain cooperation.
Matthijs Krul

6. North’s NIEH as Global History

This chapter studies Douglass North’s New Institutionalist Economic History as a contribution to our understanding of the ‘Great Divergence’: that is, the historical shift toward European (or Western) hegemony and the divergence between developed and underdeveloped nations. As Krul shows, North’s work is not solely meant as an analytical tool, but also carries implications for development economics and policy. These follow directly from the North’s analysis of the origins of Western hegemony. For North, the achievement of rich market societies was a rare breakthrough, involving a series of prerequisites that are profoundly difficult to reproduce for other nations. As Krul argues, North’s pessimism about improving institutions clashes markedly with his historical analysis of the rise of the West specifically and renders the latter unpersuasive.
Matthijs Krul

7. Revisiting Polanyi’s Challenge: North and the Limits of the New Institutionalism

The posthumous exchange of ideas between Karl Polanyi and Douglass North is at the heart of this discussion of North’s work. Where in previous chapters Krul has shown the effects that ‘Polanyi’s challenge’ had on the trajectory of North’s theoretical development, here Krul revisits Polanyi’s critique of economics to assess to what extent North successfully answered that challenge. The answer is negative. As Krul argues, while North’s work is often brilliant and extends New Institutionalist ideas to hitherto unforeseen new directions, it also keenly shows the limits of what New Institutionalism can accomplish. The flaws in North’s work are not contingent, but follow from New Institutional Economics’ core: its status as a theory ‘between’ neoclassical economics and the other social sciences.
Matthijs Krul

8. Conclusion: The Future of the Neoinstitutionalist Turn

As the conclusion to this book, Krul sums up its general themes. The heart of the book is explaining the specific nature and trajectory of Douglass North’s New Institutionalist Economic History as a response to the critique of economics formulated by Karl Polanyi. As Krul argues, much of North’s work becomes understandable as an attempt to show economics as a discipline can accomplish what Polanyi thought it could not: explain long-term institutional structure and change. Making this possible entails, however, giving up on much of economic orthodoxy. The more North developed his theory, the fewer of the norms of economics he sought to defend actually remained. The result is a fundamental contradiction in North’s thought: it is pulled in two opposite directions and reaches neither.
Matthijs Krul


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