Douglass North, Distinguished Fellow 2009
Douglass C. North has been at the forefront of several revolutions in economics. In the 1960s, North was among those who pioneered the New Economic History (NEH), applying quantitative and theoretical methods from economics to problems in history. In his 1961 book, The Economic Growth of the United States, 1790–1860, North documented the growing regional specialization and exchange across the major American regions. North emphasized the importance of the cotton export economy for leading economic growth. In 1993, the Nobel Committee recognized North and Robert Fogel for their work in renewing “research in economic history by applying economic theory and quantitative methods to explain economic and institutional change.”
In the 1970s, North turned his attention from the United States to the history of Europe, focusing on the origin and development of property rights. North and Robert Thomas asked why the West grew rich, and, in particular, why Great Britain and the Dutch Republic out-performed France and Spain. In The Rise of the Western World (1973), they answered that the British and the Dutch had better systems of property rights, helping to internalize the returns from investment and creativity.
North next asked why some countries have better property rights systems. The major intellectual breakthrough came when North conceived of institutions and political economy as central to the answer, resulting in two path-breaking books, Structure and Change in Economic History (1981) and Institutions, Institutional Change, and Economic Performance (1990). These works criticized neoclassical economics for its assumption of costlessly enforced property rights and helped revolutionize the study of institutions, including political institutions, and their effects on the economy. North focused on the role of the state, asking why some states expropriate citizens while others protect them. An impressive range of applications includes the first economic revolution, the Roman Empire, the rise of the West, and the Soviet Union.
In the early 2000s, North turned his attention to cognitive sciences and behavioral economics. In Understanding the Process of Economic Change (2005), he argued for the need for a theory of human choice and behavior rooted in how the mind works.
North’s most recent contribution addresses problems of violence. With John Wallis and Barry Weingast, North argues in Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (2009) that most developing societies solve the problem of violence by limiting access to valuable rights as a means of inducing social cooperation. But limited access constrains competition and markets. Standard economic approaches to reform recommend removing these constraints and therefore, unwittingly, propose to dismantle mechanisms that encourage domestic peace. North’s new approach provides a better way of understanding how societies are organized, and why economic development is so difficult.
North is a dedicated institution-builder. As chair of the Department of Economics, he helped build a unique program in economic history at the University of Washington, Seattle. Upon moving to Washington University, St. Louis, in the 1980s, he helped build that university into a center for the study of political economy, institutions, and economic history. North is also a cofounder, with Ronald Coase, Harold Demsetz, and Oliver Williamson, of the International Society for the New Institutional Economics.