The Role of Politics in Economic Development: Peter Gourevitch

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The Role of Politics in

Economic Development
Peter Gourevitch
School of International Relations and Department of Political Science, University
of California at San Diego, La Jolla, California 92093; email: [email protected]
Annu. Rev. Polit. Sci. 2008. 11:13759
Key Words
First published online as a Review in Advance on

January 2, 2008
agency, institutions, human capital, choice, political development
The Annual Review of Political Science is online at

http://polisci.annualreviews.org
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10.1146/annurev.polisci.11.053006.185507
c 2008 by Annual Reviews.
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1094-2939/08/0615-0137$20.00
Abstract
How have economic historians understood the role of politics in
shaping country differences in economic development? An impressive recent literature can be sorted out according to the degree of
human agency at work. At the low-agency end are perspectives
that stress geography, which is unalterable, leaving little room for
human action and hence no room for politics. At the other end
are arguments stressing deliberate, self-aware actions, hence choice,
hence a substantial role for politics. In between are arguments where
some choice occurred in the past or at a specic moment, but little
since then. What drives development? Two lines of argument are
vigorously debated: explanations that stress human capital and explanations that stress institutions. Within each camp can be found
variance on the degree of agency and hence on the role of politics.
Both vary as well on how they envisage society and its interaction
with both institutions and human capital.
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INTRODUCTION
Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

What is the role of politics in shaping economic development? Economic historians

have made substantial contributions to the
study of economic development in recent
years, work that deserves attention from political scientists because of its implications for
the study of political development. The core
dispute pits institutions against human capital. In the quest for an explanation of differential growth rates and levels of prosperity in the present time compared to some
postulated common past of relative equality of condition, is it institutions which explain outcome [an inuential argument at
least since North (1981) if not Gerschenkron
(1962)]. Or is the outcome the result of differences in human capital (Easterlin 1981), as
expressed through education, technology, research, culture, and social capital (Solow 1956,
1957; Griliches 1957; Griliches & Jorgenson
1966; Landes 1969, 1998; Mokyr 1990, 2002;
Mitch 1993; Kuznets 1966; Galor & Moav
2002)? Both arguments have strong currency
among political scientistsinstitutions in the
McNollgast (1999) tradition, culture as explored by Almond & Verba (1965), Pye &
Pye (1986), and most famously in recent years
Putnams (2000) discussion of social capital.
These rival arguments dominate debates
over policy as well as research. Did the World
Bank misread the Asian nancial crisis of
1997, and does it apply a single institutionsdriven formula to a varied world (Stiglitz
2002)? Are foreign aid and external intervention in the service of growth completely off
track (Easterly 2006)? Does the Washington
consensus around neoliberalism really mark
the end of history? Is China continuing the
Japanese model of state-led industrial policy?
Indeed, history seems to be the terrain
for vigorous battles over policy. By ghting over the role of institutions since 1500
(Acemoglu et al. 2001, 2002, 2005) or culture
since 1000 BC (Comin et al. 2006), the consequences of the Glorious Revolution of 1688
(North & Weingast 1989 versus Stasavage
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Gourevitch
2002) or technology and birth rates since 1800

(Clark 2007), legal family (civil versus common law) since about 1800 (La Porta et al.
1997) or interest groups ca. 1890 (Rajan &
Zingales 2003a, 2006), economists address
questions related to the efcacy of foreign aid,
legal regulation, political institutions, education, and social structures. The debate raises
interesting questions about the role of politics in economic development, what it might
mean to say politics does or does not matter,
and what policies would be effective. These
disputes about the past are thus of great interest both to contemporary theory and policy.
The Engerman & Sokoloff essay in this
volume considers this literature with a focus
on the role of institutions. I address the same
material with two different sets of questions:
First, when economic historians look at history, what degree of human agency do they
see? Are development paths chosen or do they
just happen? Can people change their history, and if so, who and how? And second,
what model of society and its cleavages do
economic historians use? If the stress is on
the mechanism of institutions that shape outcomes by structuring the aggregation of interests and preferences, who are the groups
being aggregated, what are the groups who cycle, and how do the institutions interact with
problems and demands? If it is human capital
that inuences outcomes, where does cultural
capital come from, and can it be designed
or created?
In my use of the term agency, I stress a
sense of intention and a capacity for choice. All
human action has some element of agency, but
analysts vary greatly in the extent of awareness, purpose, choice, deliberation, and design they attribute to human behavior. Plants
adapt to water and sun; animals follow food.
But we do not attribute intentionality to plants
and most animals, and people can respond to
incentives of which they are wholly unaware
and which they cannot inuence. If people are
like amoebae or mountains or drops of rain,
we can explore the impact of the environment

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on their behavior, but we cannot speak of intentionality, deliberateness of action, choices

on their part. Writers diverge on this issue:
Can humans design the systems in which they
operate, or are they more or less passive responders to situations?
The mechanism of reward claries the difference. Evolutionary models (Kahler 1999)
see reward or punishment: those who dont
adapt to new conditions are extinguished.
Agency, in the sense used here, is low. If humans can create their environment, e.g., by
changing institutions or by generating human
capital, then agency is high.
The dimension of agency as intentionality and design shapes the extent to which we
can speak of politics and choices. The lower
the degree of agency in any outcome, the less
we can speak of politics in explaining that
outcome. The more unconscious the mechanisms, the more the models resemble those
for evolution, and the harder it is to identify political action at work. The more behavior results from individuals and groups taking
steps in pursuit of goalsthe more we can link
outcomes to strategic acts, purposeful action,
and designthe more we can speak of politics as inuencing the course of history. The
more action matters, the more important it
is to think about who these actors are. Who
is seeking goals, and with what means? How
many actors are there? Of what do they consist? What are their purposes and resources
for political action?
These questions may matter more to political scientists than to economists, who often
have an uneasy relationship to politics. The
drive in economics to model efciency and
optimal behavior, to get prices right, can
mean irritation when political actions get in
the way. A good example is the economists
attitude toward free trade: So obvious is the
benet to the whole, how come everyone
doesnt go along? But an appreciation among
economists of the centrality of politics to economic outcomes has grown hugely in recent
years, as economists have become interested
in modeling observed behavior. In so doing,
their examination of history, outcomes, social process, has increased substantially. Local knowledgeof customs, family patterns,
social structure, etc.was previously ignored
because economics was considered universal,
with no national specicity. Now such knowledge is seen as as necessary, at least to make
sense out of the variety of incentives people
actually face. The commitment to strong analytic techniques married to an appreciation of
local circumstance produces substantial tension between parsimony and applicability, and
that makes for interesting work! And with this
broadening of the focus among economists
and economic historians, a wide range of views
have developed on the two points of interest
addressed in this essay, which have substantial
bearing on the work of political sciencethe
role of human agency, and the structure of
society seeking to exercise that agency.
THE DEGREE OF AGENCY:

THE ROLE OF CHOICE
To what extent can societies shape their destiny and how? We focus here on the battle between human-capital arguments and institutionalist ones. This division cross cuts
the high- versus low-agency distinction, as
there are high- and low-agency versions of
both human-capital and institutions arguments. Each side has been using history to
bash the other in a kind of Pac-Man gobble:
Human-capital arguments undermine institutionalist ones, and institutions are used to undermine human capital.
Let us start with a well-known work to
anchor the low-agency end of the spectrum: Jared Diamonds Guns, Germs and Steel
(1997). Not an economic historian, Diamond
does not belong properly in this sample of
authors, but his popular book provides a
useful reference point for framing a typology on human agency and choice. Why,
asks Diamond, did certain groups succeed in
spreading their genes, language, and culture
about 10,000 BC, overwhelming the rest of
the human population and leaving but ve
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dominant cultural-racial groups? The answer

for Diamond is geographical accident, or what
Easterly & Levine (2003) call the natural endowment school, given by God not man
in Van Youngs (2007) phrase. These groups
happened to be living in advantageous locations when the techniques for deliberate cultivation of various grains were discovered; the
alignment of mountains, deserts and rainforest and the type of climate interacted to favor some groups over others in growing more
food. Producing more calories meant their
populations spread, and thus their language,
culture, and physiognomy, reducing human
variety. For those who happened to live near
potentially useful animal species, domesticating these animals provided protein and the
equivalent of machines; it also generated immunity from diseases through animal-human
disease cycles. In this process, there was little
decision making. People ate and multiplied
and moved when it got crowded, something
like the spread of a species of trees or animals. There was some individual agency
humans had to learn the new food technology, adapt their social organization, and make
mental adjustmentsbut they were responding to situations, not shaping them. From
this process eventually emerged social institutions, cultures, and structures that make
sustained decision making possible, thereby
creating our analytic problem of social capital versus institutions. Hunter-gatherer societies certainly had some structure, but societies took a long step toward complexity after
settled agriculture.
Diamonds argument cannot deal with differentiation in behaviors within these settled
societies. It does not explain why, say, German
or British economic development took that
subgroup of Caucasians ahead of Greece or
Poland, nor why one region of China dominated the others. Diamonds Collapse (2005)
explores the implosion of some societies (their
destruction of their habitat, or failure to cope
with stress from changes in climate), but to account for it, Diamond has to enlarge the scope
of inquiry to include variables not in the struc-

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tural argument of Guns, Germs and Steel, such

as cultural repertoire. The Nordic groups
who settled Greenland, for example, refused
to learn from native peoples the skills needed
to hunt seals, so when the weather got too
cold for the grains and animals around which
their culture was built, they died or went back
to Europe. In other places, societies failed
to manage the commons to preserve trees or
stop erosion. Diamond notes these failures but
does not provide a general theory of why some
succeeded and others did not.
At the other extreme of agency, we can
locate great man or leader theories ( Jones
& Olken 2005): explanations of Singapores
vigorous growth rate based on Lee Kwan
Yus leadership, or shifts in Chinese growth
rates attributed to the change from Mao
Zedong to Deng Xiaoping, or the role of
enlightened despots in eighteenth-century
Europe, or the leadership of Mandela versus
that of Mugabe. A more structuralist analysis
granting high agency is that of Bates (1981)
on African economic development. Leaders
based in cities require approval from urban
residents whose rioting could overthrow the
regime; therefore, such leaders pursue policies that keep food prices low, even though
this hurts the agrarian masses and hinders
economic development. Thus, to hold power,
elites pursue antigrowth policies to placate
interest groups. At the rm level, Hermalin
(1998) explores the role of leadership and
how it induces compliance.
The interest in geography, a low-agency
variable, goes back to Montesquieu, Tocqueville, and the Greek philosophers before
them. A contemporary version of the geography hypothesis associated with Sachs &
Warner (1995, 1997) revives the earlier interest in distance to the equator: The tropical areas near the equator and the very cold regions
around the poles have done less well economically than the temperate zones in between.
The fact is not disputed, but much ghting occurs about the mechanisms at work. The lowagency version stresses things people could
not overcome, such as disease, soil infertility,

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harsh weather (ooding, monsoons) in the

tropics, and extreme cold in the north. Other
authors, seeing greater human agency, argue
social structure and institutions lay between
the objective facts of geography and the
human elements that inuenced economic
growth (Easterly & Levine 2003). Acemoglu
et al.s (2001, 2002) settler death-rate argument is an example of this viewpoint: Disease
in the tropics induced the creation of political institutions whose policy outputs inhibited
growth (discussed below in the section on institutions) (Rodrik et al. 2002).
An important indicator of how the analyst
handles human agency is time frame. When
did countries or regions diverge in their trajectory to the present day? The farther back
we locate the starting point of differentiation,
the smaller the role of agency. Diamond starts
more than 12,000 years ago in the timing of
settled agriculture; his key variable is geography, and agency is low. Economic historians
interested in long duree are engaged in an
arms race over pushing the date backward,
trumping each other by nding a prior
moment. The common versus civil law argument of La Porta et al. (1997) uses ca. 1800,
the foundation of the civil law by Napoleon;
Acemoglu et al. (2001, 2002) push the critical
date back to 1500 and the beginning of Europeans settlements outside their continent;
Comin et al. (2006) go to 1000 BC, measuring the geographical distribution of cultural
artifacts; and Galor & Moav (2002, 2004),
along with Olssen & Hibbs (2005), go back
with Diamond to the origins of agriculture.
The choice of settled farming over the life
of hunter-gatherers was a great watershed in
human history, as it marks the beginning of
known civilizations. It also demonstrates an
element of agency in the distant past. Why did
people make this change? Farming produced
more calories, hence more peoplebut also
more inequality, as well as more disease due
to a less diverse diet, crowding, and greater
work stress. Olssen & Hibbs (2005) suggest
that the regions that rst undertook agriculture are the ones that remain richer today.
The shift, argue Galor & Moav (2002), came

because of changing social structure and incentives. Instead of extended families hunting together, individuals were now rewarded
for their particular efforts. Once some families took up farming, evolutionary selection
favored them. Although there may be some
level of individual agency in placing self over
family, the larger process at work is one of
low agency and awareness, with little social or
institutional design.
Human Capital
Going very far back in time has the effect of
undermining institutions as an explanation.
Comin et al. (2006) go back to 1000 BC. Focusing on human capital, they measure the
density of artifacts and evidence of cultural
creation as these are distributed geographically. They nd that the greater the density
in 1000 BC, the greater the level of economic development in 2000 AD. The institutions in these lands have varied greatly over
3000 years, so if some effect persists over that
length of time, it cannot be caused by institutions. The level of agency is low: Whoever happens to live in culturally rich territory
picks up the benets of being there, without
any clear election or mechanism of doing so.
Looking at a somewhat closer time frame,
since 1300 AD, Clark (2007, p. 12) offers a
strong statement on the importance of human capital as a challenge to institutions
arguments:
Despite the dominant role that institutions
and institutional analysis have played in
economics and economic history since the
time of Adam Smith, institutions have little direct role in the story told here about
the Industrial Revolution, and about economic performance since then. This is because already by 1300 societies such as England had all the institutional prerequisites of
economic growth now emphasized by the
World Bank and the IMF. These were indeed societies that were more incentivized
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than are modern high income economies.

Approached from the Smithian perspective
the puzzle is not why medieval England had
no growth, but why modern day northern
European countries, with their high tax rates
and heavy social spending, do not suffer an
economic collapse. The institutions necessary for growth existed long before growth.

Prior to about 1800, population growth

ate up productivity gains, so countries were
stuck in a Malthusian trap. After 1800, advancing technology and human capital combined
with falling birth rate, allowing countries to
break out and grow. People developed habits
of thrift, savings, and work; these spread because families who had these values had more
survivors than the poor who died out. Clark
argues that institutions of the kind stressed by
policy makers at the great international agencies, by many writers (e.g., North 1981, North
& Weingast 1989), and by strong currents of
modern theories in economics and political
science, were not the driving force. At the
same time, Clark pays serious attention to social and political stability in England but does
not explain it. Are institutions really marginal
to that stability? Does the comment on social
spending in the quotation above reect an assumption that political choices could never be
economically efcient, and thus that spending
on education, health care, retirement plans,
and child care are not large collective insurance solutions to problems in private markets?
Agency seems low in Clarks argumentation:
Breakthrough happens when the accumulation of human capital and the masses of separate private decisions to limit birth coincide;
no social choices are made by specic individuals at any specied point in time.
Human-capital proponents divide along
degrees of agency depending on what part of
a causal channel attracts their attention, while
institutions arguments tend more frequently
toward higher agency as few economists are
Burkeans (see below). On the low-agency
side of the human-capital category are arguments that derive behavior from the at142
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tributes of individuals or groups, such as education, time horizons, and values. Higher
agency arises if these attributes are problematized to inquire about their origins, and even
more agency if they are seen as potential targets of policy or human design.
A very large literature examines the consequences of cultural attributes but not their origins. People are born to a group, and through
socialization either do or dont acquire a particular attribute. There may be agency in the
socialization process, but generally in political economy, acquiring the feature is treated
as a given. For many years, slow growth in
East Asia was attributed to Confucian culture,
with its deference to authority and inhibition
of risk taking; but when growth there took off,
that too was attributed to Confucian culture,
with its respect for education, hard work, and
strength of family ties in solving problems of
moral hazard.
Human-capital arguments have higher
levels of agency if they explore the origins of
the cultural attribute, or the social and policy mechanisms that encourage groups to acquire it. Becker & Woessman (2007) probe
Webers famous theory about the impact of
the Protestant Reformation on the growth of
the capitalist economy. They agree that there
was a link but think Weber got the mechanism wrong. Where Weber stressed the impact of religious belief itself as motivating
people to strive in order to prove they were
among the elect, Becker & Woessman stress
the effect of Protestantism on literacy and education. Luther translated the Bible and encouraged familiarity with it. They correlate
the spread of Protestantism, literacy, and economic growth, and conclude that the change
in education proves more powerful than the
religious explanation of Weber. They do not
consider an alternative argument that relies on
neither mechanism: The Protestants changed
the structural position of the church in their
countries by dissolving the monasteries, giving or selling church lands to their supporters, and turning out the monks. This contributed to the already ongoing development

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of a land market. It also weakened considerably the autonomy of the church as a political actor, as ministers were dependent on
private contributions from their congregations or on state assistance that was politically determined. Human capital becomes less
important here than political and social institutions. Walzers (1976) earlier argument
also stressed a political consequence to the
impact of religion: Belief motivated people
seeking their place in a rapidly changing society to engage in political action. By inuencing the conict with the Crown, religion
helped bring about the long-run institutional
changes that shaped economic development.
This is a social-institutions argument, not a
formal political-institutions one or a humandevelopment one.
This argument involves an intermediate
level of agency. It turns on Luthers translation of the Bible (high agency at a single point
in time) and the spread of education from that
point on (the agency of each parent), and only
much later, state education policy. One could
ask what caused the Bible to be translated at
this point. With the recent invention of the
printing press and the drive for items to print
and sell, as well as the growth of education
and trade associated with the Renaissance in
the century before Luther and the Protestant Reformation, translation of the Bible into
the vernacular seems to have been inevitable.
This development could be explained by great
man theory with high agency, or it could be
made more sociological with lesser and indirect agency by asking why literacy started to
spread.
Another argument linking human capital to religion explores the historical link
between Judaism and high educational attainment. Jews, along with other diaspora or immigrant groups (overseas Chinese, for example), loom large in explorations of the human
capital/education account of economic attainment, as they disproportionately populate the
data on high achievers. Botticini & Eckstein
(2006) focus on what is usually missing from
such discussions: Why is there a link between
a religious/ethnic group and an attribute (e.g.,

Jews and education) in the rst place? A common argument sees in education a solution to
blocked opportunities in other modes of life.
Limited by diaspora conditions or prejudice,
Jews became peddlers, merchants, accountants, lawyers, and bankers because they could
not rise in the traditional rm, as landowners,
at court, in the church, or in the army.
By contrast, Botticini & Eckstein ask what
gave them the skills and cultural capital to respond to discrimination in that way. They explore a moment in Jewish history in about
200 BC, when Jews were divided theologically between ritualists and readers. For
the former, religion meant the performance
of various rites and practices associated with
the synagogue; for the latter, religion meant
reading the Torah, and as this required education, they required that their sons learn
to read. The destruction of the Temple shattered the rst group, so the readers prevailed.
Education was costly, however, requiring resources. Jews split: Where conditions of political stability allowed economic growth, those
with skills could make use of them. Where
conditions supported only basic agriculture,
the skills of the readers had little practical
use, and in that environment substantial conversions away from Judaism occurred. Where
conditions supported the use of skills, the
learning-oriented Jewish communities ourished, and they often moved to where these
skills were useful. It is this reading group that
has survived to populate contemporary studies of achievement-oriented cultures. An early
decision (toward education in the rst millenium) became, centuries later, an advantage
when the role of technology in the economy
favored education.
There is substantial agency in this argument, at least at times. More than two millennia ago, individuals were choosing between
different forms of religious expression in their
own culture. Other actors chose to invade
the area of Jewish settlement and destroyed
the Temple, which disrupted the preferences
of one group, shifting the religion toward
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learning. Individuals then chose between a

costly investment of education and abandoning the religion. The educated made choices
as they sought to follow opportunity and ee
persecution. With religion and culture we can
problematize the attribute that leads to economic achievement: Why do people stay with
the religion, especially when its adherents are
persecuted? Members of a racial group cannot
leave in the same way, but racial boundaries
are themselves constructed in some measure,
so even race is not wholly devoid of agency.
We might be able to nd individual choices
in many structural situationswhether to
pursue the woolly mammoth or plant grains,
for examplebut not many researchers have
done so. There is a social context in the religion cases as well: Continued investment in
learning for Jews and Protestants depended
on societys willingness to reward it.
The discussion of educational values in social groups leads to policy debates and comparisons. If attainment inheres in group attributes, responsibility for success and failure
lies with them. If group attributes are malleable, inuenced by incentives in social context, then there is an external inuence on
the outcomes and possibly room for policy to
have an effect. Political conservatives opposed
to policy action tend toward the former, favoring the notion of individual, and possibly
group, responsibility; political liberals stress
social context in the operation of discrimination and poor incentives, and support policy
response.
As the economic development literature
moves from cultural features of groups to
issues of educational systems in society, the
agency issue shifts. Many theories of economic development have long turned on skills
and knowledge. That education matters is not
controversial, although its importance relative to nance or other variables certainly is.
More difcult is explaining why education
takes place and why it becomes an object of
public policy. It is not sufcient to show its
macro benet to an economythe functionalist fallacy of imputing cause to effect. There

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is a collective-action problem and an interestgroup one. The money has to be raised, allocated, and spent effectively, and agency issues
inevitably arise in the politics of how these
things are done.
Whatever the collective benet of education, some will oppose it. They may resist paying the taxes. They may fear economic growth
will undermine their privileged position in society (elements of the Russian aristocracy in
the early nineteenth century opposed building railroads for this reason). Rajan (2006)
explores the bargaining among social groups
that may model the decision to invest in education or to block it; he examines under
what conditions an upper, middle, and lower
class will agree on one course of spending or
another. It is clear that spending on education and research involves agency and politics. There may be a path-dependent long
duree element in it: If a society reaches some
equilibrium commitment to such investment
and expenditure, it can persist without obvious conict.
If high skills and research make for greater
wealth, can countries create these by design?
Mokyr (1990, 2002) explores the generation
of science and technology as key drivers of
development. The degree of agency varies in
differing elements of his discussion. It is lower
where the values of the general culture particularly favor or inhibit innovation, higher with
specic elites or rulers threatened by change,
and medium in the activities of the networks
of highly educated people from whom many
innovations come.
More agency can be seen in deliberate
efforts to improve training and knowledge.
The United States pioneered mass education. It established comprehensive public high
schools in contrast to French lycees and the
German gymnasia, and mass universities instead of an Oxbridge limited to the graduates of elite preparatory schools. Mass funding for research, universities competing for
resources and talentthese are noted features
of the US system of higher education. They
were clearly the result of policy choices made

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by specic actors. The decision points can be

noted, charted, documented.
Why did politics produce these public
goods in a country whose political system
is frequently criticized for having difculty
providing comprehensive health care, mass
transportation, and other public goods? The
open democracy in this case made the US
system more responsive to mass desires, less
protective of traditional interests. Competition among the states drove them to attract settlers by lowering the suffrage requirements, to seek industry and investment
Turners (1949) frontier hypothesis. International competition caused other countries to
broaden their educational systems, and many
have caught up. The United States no longer
leads the world in levels of investment in mass
education. It still leads at the university level,
but for children in grades K-12, the education
results are skewed, with a well-educated upper
class, and uneven education among much of
the rest of the population. Note how quickly
this discussion moves from issues of human
capital and group culture to institutions and
interest-group politics, which are examined
below.
If human capital can be created by design,
what about culture? European social policy
(Esping-Anderson 1990) promotes family ties
through welfare measures and job-protection
legislation. These support a family-centered
culture, which in turn provides support for
the policies. The justication derives from
pro-family views of various sources, such
as religion via strong Christian Democratic
parties. The social democratic justication
stresses individual choice and decommodication of work, separating assistance from
male-centered workplace structures. Neoliberal ideas oppose intervention altogether. All
three sets of views seek to engineer culture
through policies, generating social relationships that promote specic cultural attributes.
In explaining the East Asian miracle
the rapid growth of several countries since
about 1960education has loomed large.
Governments made big bets in spending
money. Korea and Taiwan spread training

broadly, sacricing quality in the short run
to get a broad reach; India has developed a
very highly educated elite at the expense of
breadth; and China has done both. All of them
have built up specialized training and research
institutes. Singapore offers employee training and research institutes as inducements
for multinational corporations to locate there.
The payoff has been considerable, as these
countries moved up the value chain of the international economy.
A version of the human-capital argument
that focuses on trust and private bonding
mechanisms (Coase 1960) plays a substantial role in debates about growth and institutions. Where formal legal protections are
weak, cultural ties such as ethnicity and religion can provide the functional equivalent in
credible commitment mechanisms (McMillan
& Naughton 1992, McMillan & Woodruff
2002), and informal institutions can provide
some of the information needed to verify reliability in contracts [see Greifs (1993) work
on Maghribi traders in north Africa, and on
the medieval trade fairs in Champagne (Greif
et al. 1994)]. Here cultural arguments and
institutionalist ones cross paths, as culture
substitutes for institutions and plays a coordinating role in them (Kreps 1990). Institutions can, conversely, be seen as generating
culture. Tocqueville argued that the dependence of French civic culture on the state derived from Louis XIVs centralization, a dependence which the French Revolution was
not able to change and which contemporary
writers see hampering French policy making
to this day (Levy 1999, Culpepper 2003).
As we probe human-capital arguments, we
move closer to issues of institutions, and the
societies that use them, to understand why we
observe the levels and types of human capital
that exist. It is to these that we now turn.
Institutions
So far we have explored economic history
that stresses human capital. The other main
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branch of argumentation stresses institutions

(the focus of Engerman & Sokoloffs essay
in this volume). Writers in this vein suggest
greater agency: Institutions are rational human creations, designed to solve problems,
which can be changed by deliberate action
when humans are motivated to change them.
Less agency exists in a Burkean view of institutions, which sees them as organic structures accreted over long periods of time by
habit, custom, tradition, and interests. In this
view institutions are hard to change, and indeed dangerous to change quickly, but also
dangerous if totally closed to adaptation under changing circumstances. Few economists
seem to be Burkeans in this sense; most write
about institutions as machinery designed to
achieve a goal.
Among the institutionalists, Acemoglu
et al.s (2001, 2002) widely discussed work
looking at European settlers from ca. 1500
has a medium level of agency. Where settlers faced disease in the tropical climes, most
of them died or departed, leaving agents in
charge of authoritarian extractive institutions.
This succeeded in providing a lot of wealth
for an elite so long as the economy favored
extraction, low skills, low levels of managerial
sophistication, and command allocation. For
example, it worked for economies based on
sugar cane, mining, and cotton. But when economic development favored skills, markets,
and exibility with looser coordination, the
advantage shifted to the areas of direct settlement. There, the settlers created better institutions for governing themselves than they
did for ruling over serfs or slaves. It is these
structures that have proved in the long run to
favor growth, and caused the shift in the distribution of wealth after 1500. Thus, given environmental constraints, actors made choices
on institutional design to attain goals: an institutionalist account that includes a signicant
level of agency.
The Acemoglu et al. argument has been
attacked on the basis of its measurements of
settler death rate. If we substitute for disease the treatment of labor (the use of na-

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tive serfs or imported slaves versus independent family farm owners or free workers),
we get the same general pattern: an initial
spurt of success for the harsh-labor countries, when products favoring intensive labor
methods prevailed, but then relative decline
when the industrial market economy shifted
the terms of trade advantage toward freer labor and markets. This is the line of reasoning
in Engerman & Sokoloffs (2005) well-known
paper in which inequality is used as an indicator for good versus bad institutions. A general
critique of these arguments can be found in
Przeworski (2004).
The power of institutions comes across
strongly in North & Weingasts (1989) work
on the English Parliament in 1688, one of the
most inuential and widely cited items in the
institutionalist repertoire. Parliaments defeat
of the King meant that executive authority
would be constrained. Creditors felt condent in protection from government seizure
of property and from government bankruptcy;
as a result, interest rates fell, and the foundations for economic growth and empire were
laid down. Thus, institutions created a credible commitment for limited government that
was binding for generations, an argument
with considerable agency at a specic historical moment. Stasavage (2002) challenges this
formulation for neglecting the issue of who
sat in Parliament; the interests represented
in French legislatures were less concerned
with bankruptcy than their counterparts in
England, so the formal institutional issue is
confused with the social composition of representation. Rosenthal (1988) critiques North
& Weingasts omission of religion and foreign
policy as key elements of division over the behavior of the Crown. Issues of society and social composition keep entering the discussion
of institutions, about which more below.
Another body of well-known work, the
legal family school for explaining the development of corporate governance and nancial institutions, features one-shot agency.
At a key moment, we can identify actors who
made decisions in selecting or imposing civil

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law, but after that, no choices or actions, no

political processes seem to occur. La Porta
et al. (1997, 1998) suggest that variance in
regulation dealing with corporate governance
systems derives from legal family: Civil law
countries (France, Spain) offer weaker protections to investors than do common law
countries (United Kingdom, United States).
As a result, common law countries have diffuse shareholders, whereas civil law countries
have concentrated blockholders who sit directly on corporate boards. The nding is
widely cited, is widely used for many sorts of
work on diffusion (one of many examples is
Simmons & Elkin 2004), and has provoked
numerous criticisms. Acemoglu & Johnson
(2005) differentiate between contracting institutions and property rights institutions,
where the former refers to the regulations that
shape private interactions between citizens,
and the latter to the regulations that shape
the behavior of political and economic elites.
Legal family refers to contracting institution.
When pitted against property rights institutions, the effects of legal family wash away.
The authors raise similar objections to arguments that stress nancial institutions, rather
than property-protecting institutions (Levine
1997, 2005; Glaeser et al. 2004; Laeven &
Woodruff 2004).
For our purposes, the most relevant criticism of the legal family argument has to do
with the immutability of the driving mechanism of causality. Once a country has picked its
legal family, at one moment of agency, it seems
locked in and cannot change the rules that affect corporate governance or other outcomes.
After that initial move, agency is quite low. Yet
empirically we see changes in corporate governance patterns within countries over time.
In their essay on The Great Reversals, Rajan
& Zingales (2003a) show that country patterns
of equity and bank debt changed over time
(they give data from 1890 to 1999). France
(the creator of modern civil law with the Code
Napoleon) and Japan in 1910 had rapidly
growing stock markets, but events led to policy change: World War I, the depression of the
interwar years, and the wartime economies of

the 1930s and 1940s. Both countries saw a dramatic increase in government intervention,
which shifted credit allocation toward banks
and government ministries. France and Japan
did not change legal family in the twentieth
century, but they did experience change in
policies that inuenced corporate governance
regulations and outcomes. Musacchio (2007)
explores change over time within Brazil, a civil
law country, and Berkowitz et al. (2003) show
how local factors alter law imported from elsewhere in the transplant effect.
The United States offers a similar case of
change within a legal family, this one in a common law country. In the late nineteenth century, American corporate governance patterns
resembled those of Germany. JP Morgan took
large stakes in companies to which he was funneling capital (largely European) and placed
his agents on boards to reassure his largely
foreign investors (DeLong 1991). American
politics intervened, shows Roe (1994). Prairie
populism, labor radicalism, small property
owners resentment against the trusts, and
Progressive Era reformism generated a series
of legislative acts at the state and federal level,
including the Sherman Anti-Trust act, insurance reform in New York, the Securities and
Exchange Act of 1935, and laws on accounting
and labor regulation. Such legislation pushed
the American rm from the German model
toward the type of corporation famously analyzed by Berle & Means (1932), the corporation of diffuse shareholders, managerial autonomy, and arms-length relationships among
rms.
If, contrary to the legal family theory,
country policy and practice on corporate governance varies over time within countries,
what explains the variance? One stream of
writing stresses interest groups. Roe (2003)
extends his analysis of the United States to a
comparative analysis of OECD countries and
nds strong relationships between partisanship, minority shareholder protection (MSP),
and shareholder diffusion. The longer left
governments have been in ofce, the weaker
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is MSP and the more concentrated is blockholding (and the greater is equality in GINI
coefcient and strength of job protections in
labor law). Pagano & Volpin (2005a,b) suggest
cross-class coalitions of management blockholders and labor allying to protect the rm
against outsiders (minority shareholders and
hostile takeovers). Ciof & Hoepner (2006)
explore a transparency coalition of workers and minority shareholders with assets in
pension funds and institutional investors such
as TIAA-CREF or CalPERS allying to press
for greater MSP. This ips Roes model, so
that inside investors, allying with conservative
groups, oppose MSP, while the left supports
it. Ciof & Hoepner nd evidence for this in
debates over reforms in the United Kingdom,
United States, Germany, and France, as well
as at the EU level.
Which coalition prevails? Those that have
substantial resources for political action, such
as money, votes, and organizational clout.
With resources for action held constant, institutions can inuence the outcome. Pagano &
Volpin (2005a) nd that corporate governance
variance correlates with electoral law: Countries with proportional representation have
more blockholding than do countries with
majority voting systems. Gourevitch & Shinn
(2005) nd similar results contrasting majoritarian versus consensus institutions (Lijphart
1999). This research ts into the well-known
literature on veto points and veto gates, showing the impact of formal institutional arrangements on outcomes (Levi 1988, Tsebelis
1990, Carey & Shugart 1992, McNollgast
1999, Persson & Tabellini 2000, Haggard &
McCubbins 2001, Grossman & Helpman
2002).
Haber et al. (2003) apply institutions analysis to examine the differences between nancial development in Mexico and the United
States. In Mexico, closed political processes
allowed the government to favor key supporters, limiting development of the nancial
sector and inhibiting growth; in the United
States, federalism and competitive elections
made for open capital markets and growth.

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Lamoreaux & Rosenthal (2005) show variance in organizational forms within countries.
Hoffman et al. (2007) explore the impact of
institutions on nancial crises.
Political instability could itself be a major
variable shaping the development of markets.
Looking at countries without strongly rooted
democratic institutions over four decades,
Roe & Siegel (2007) nd a causal channel
that runs from political instability to nancial backwardness. Stability creates the conditions that allow private bonding mechanisms
among owners to develop; this generates the
desire for regulation to solidify the bonding
mechanisms, which in turn leads to the law
and structures that enable further diffusion.
Thus the law comes after, not before, diffusion. (Chefns 2001). The history of rms and
national trajectories is providing valuable material on the role of policy, private bonding
mechanisms, and families (Morck 2005).
The institutionalist arguments vary with
the location and extent of agency. Is agency
located in the creation of the institutions?
If so, it may be distant, leaving little discretion in the hands of contemporaries. Or is
the agency in the people who are operating
through the institutions, making strategic calculations about how to make them work for
their benet? Do the contemporaries have
much choice, or are the institutions fully constraining, fully binding? If fully binding, as the
founders of the institutions must have sought,
there is little agency left; if not, if contemporary ofce-holders could defy or change
the structures, the institutions cannot be fully
binding. Current agency rises, and the historical agency of framing fades. This raises to
the forefront the agency issues involved in explaining the mechanism of path dependence
(Pierson 2000) and brings to the center the
social issues of agency.
GETTING SOCIETY RIGHT

If there is agency, in which case we can speak
of social choices, we need some notion of
who is making the choices. The institutions

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literature has called attention to the importance of formal political structures in shaping the outcome, and the literature on those
structures and their impact is quite rich. At
the abstract level, institutionalists impute high
agency because of their emphasis on design.
However, without a strong sense of who is
acting through these institutions to produce
outcomes, the agency fades. Narrative history is clearer on agency, at the cost of more
generalized causal mechanisms and a sense of
structure.
We need to understand the social elements
that are engaged in the aggregation of preferences that institutions perform. Madisons
Federalist 10 is a famous example of institutional design being applied to solve the problem of faction, but citations of it generally neglect the Framers model of American society
(Kernell 2003). Economic historians vary in
how they conceptualize society on several dimensions. They disagree about the number of
social actors, the composition of social actors,
and the resources actors have for inuencing
political action.
Number of Actors
Acemoglu & Robinson (2005) model a bargain between rich and poor, thus two actors, as
does Boix (2003). They explore the conditions
under which rich and poor bargain to produce democracy. By contrast, Moore (1966),
from whom Acemoglu & Robinson claim inspiration, imagines three actorsaristocracy,
middle class, and peasantwhose pattern of
alliances and conict drive the trajectory of
political development in each country toward
democracy, fascism, or communism. If the
middle class allies with the aristocracy, authoritarian outcomes are likely, as happened
in Germany; if it allies with the working class,
a democratic outcome is more likely, as in
the UK case; and a peasant-worker combination supports communism. In their treatment of actual cases, Acemoglu & Robinson
use a more complex pattern of social elements
combining in various ways, but their lean
model strips the number of actors to two. Like

Moore, Rajan (2006) models three actorsin
his terms, oligopolists (or oligarchs), the educated (or a middle class), and the uneducated
(or the poor)in order to examine what combination will produce, or block, investment in
education.
The issue of two versus three actors is important because it shapes the range of bargains
and coalitions that can be examined. The twoactors version has a zero-sum quality, as we see
in discourse about labor versus capital or rich
versus poor, and is usually thought of as a horizontal cleavage of society. With three groups,
more combinations are possible, and thus a
more complex game. If sources of division internal to each group develop, the situation becomes open to more political possibilities; a
horizontal division [upper versus lower; upper, middle, and lower; or, in terms of factors
of production following Stolper & Samuelson
(1941), land, labor, and capital] can thus become split by a vertical cleavage, dividing the
class elements internally.
A vertical split can be politically dynamic
because it mixes different sources of stratication and power. Class structures confer
privileges in access to political institutions, or
cultural status, or economic position. When
these overlap and reinforce each other, the
upper-class domination is stable. When these
sources of stratication conict, a range of
combinations opens up, and stability is threatened. Many studies of revolutionary periods
suggest this process: Upper classes divide,
whether for economic, social, status or religious/ideological reasons; and as they conict,
they seek allies from below. This creates an
opportunity for considerable change.
Much writing on the English Civil War
implies that the two sides were not aristocracy
versus bourgeoisie, or rising versus falling
bourgeoisies, but rather rival combinations
of several social groups, divided by different
positions in relationship to economic change.
They can be seen, using contemporary
language, as the Old Economy (on the side
of the King) and the New Economy (on
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Parliaments side). Each side was heterogeneous, with plenty of opportunity for internal
conict (landowners pushing their tenant
farmers over the returns from the growing
wool trade; merchants in tension with artisans over wages), but each hung together
against their also heterogeneous opponents.
Religion may have helped each side manage
these internal divides, by unifying the allies
around some common ideology (Puritans
and dissenters on the Parliament side, high
establishment Church advocates on the Royal
side). After the constitutional bargain of
1688, at the time of the key democratizing
moment of 1832, the social structure again
split into Reformist and Anti-Reform elements, slicing through the class system from
top to bottom. As industrialization began, the
English aristocrats were heavily involved in
this latest round of new economy through
land ownership, share purchases, and nance;
large blocs of them supported the Reform
Bill of 1832 and the key move in economic
policy, the repeal of the Corn Laws in 1846
(Schonhardt-Bailey 2003). Change came
because the modernizing elements of the
upper class supported it, in alliance with
important segments of other social groups.
This complex coalition of modernizers
versus defenders of the status quo is common to civil wars, revolution, and periods of
policy conict. The modeling challenge is to
combine parsimony with a way of viewing the
combinations of groups that reects social reality. The larger the number of groups, the
greater the range of equilibrium outcomes and
hence the more difcult the modeling. The
more complex the pattern of who wants what,
the greater the range of possible outcomes,
and thus the harder it is to simplify observed
reality into prediction.
A classic locus of these issues is the political economy of trade. Following Stolper &
Samuelson (1941), abundant factors of production support free trade, while scarce factors support trade restrictions. Viner (1948)
relates the split to uidity of asset allocation, or asset specicity: Those with high asset

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specicity are vulnerable to economic shocks

and opposed to free trade, whereas those with
low specicity can be more exible, thus open
to free trade. High asset specicity invites
cross-class alliances within vulnerable sectors
(e.g., steel workers pushing for duties or antidumping regulation), whereas low asset specicity facilitates horizontal cleavages over the
return to each factor. Hiscox (2002) explores
the uctuation between factor-based alliances
and sectoral ones as the degree of asset specicity changes over time. Rogowski (1989),
Gourevitch (1986), and Brock et al. (1989) apply these ideas to historical cases.
Most of this writing on society imputes
agency to the groups: classes, interest groups,
producers, consumers, workers. It often
infers their utility function from revealed
preferences, or a deductive model taken from
economics, or some other theory. Economic
sociology has been challenging this view,
arguing that the preferences and the strategic
behavior are constructed (Dobbin 2004).
Composition of Actors
Many discussions of society and policy
focus on the number of groups and neglect
compositionthe different avors within the
same label. In Moores (1966) analysis, the
alliance patterns between the aristocratic and
middle classes in England and Prussia differed
because each had already evolved distinctive
relationships to the economy and institutions;
many of the commercialized English aristocrats blended more easily with the merchants
and were already supportive of constitutional
government before democratization got
under way. Hall & Soskice (2001) show how
groups combine differently according to the
type of production system in which they
operate. In coordinated market economies
(CMEs), capital and labor cooperate to
preserve high-investment, high-skill structures; in liberal market economies (LMEs),
the two groups conict, as capital prefers
low-commitment strategies toward labor
and subcontractors. Germany is the classic

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example of the former, the United States and

the United Kingdom the archetypes of the
latter. In the CME countries, capital supports
job security, welfare support and training built
around the workplace, and the taxes to go with
them; in the LME countries, capital opposes
these restrictions on its freedom and increases
of its tax costs. A factor conict model cannot
account for these differences (Mares 2003a,b,
Streeck 1984, Thelen 2004, Estevez-Abe
et al. 2001, Iversen & Wren 1998, Berger &
Dore 1996). Milgrom & Roberts (1995) explore these interconnections as institutional
complementarity, where one aspect of the
economy reinforces another.
Iversen & Soskice (2002) and Cusack et al.
(2007) explore the inuence of early socioeconomic forms on the choice of institutions. Proportional representation and consensus structures seem more likely to have
been chosen by countries that had traditional
guild, business network, and other communitarian structures when industrialization began
in them. Those groups designed institutions
to take advantage of and preserve what they
had (Manow 2001).
The agency in these sorts of arguments
is structurally shaped incentives. The action
of individuals and groups responds to the
rewards or punishments they get from the
structures in which they operate. The analytic
energy of research goes into probing the
structures; why people respond to them is
left mostly to other disciplines, albeit with
growing interest in both economics and
political science.
Political-Action Capacity of Actors

Apart from their number and composition,
the capacity of social groups for political
action is important. Acemoglu & Robinson
(2005)known as institutionalistsunleash
a strong critique of the institutional model
by arguing that de facto forms of power can
override all the restraints imposed by de jure
power. De jure power is that created by formal structures of political authority (parlia-
ment, president, courts, etc.), whereas de facto

power lies in social organization (e.g., control
of guns, money, media). Repeatedly, in countries around the world, de facto power undermines de jure power, so that constitutions are
eroded. The ability of one generation to bind
those that follow by the design of institutions
is thus constrained. For centuries, landowners, those who controlled private armies, those
who controlled knowledge, and more recently
those who controlled nance, industry, and
other realms of the economy have been able to
burst whatever institutional chains have been
imposed on them.
This leads us to want an understanding
of de facto forms of powera very different
agenda from the careful analysis of de jure
power in much of the research on institutions
by economists and political scientists. Rajan
(2006) reinforces this critique, pushing for
an inquiry into the social foundations of
the kinds of power that are effective in the
political arena. Rajan & Zingales (2006)
explore the creation of constituencies to
support reform. Morck et al. (2005) examine
the problem by exploring the connection
between concentration of economic power
via blockholding and political power.
Social structures do comprise a type of institution, different from parchment or de
jure institutions. Some theorists apply the
word institution to norms and other elements
of social communication that inuence strategic action. The growth of interest in these
other meanings should be welcome (if the
distinctions can be distinguished), and each
has different implications for agency. De jure
institutions have high agency, typical of explicit design arguments, with the immutability problem noted above. The other meanings of institution vary in agency depending
on how they are used.
Social structure may have a substantial
impact on political and economic reform.
Moore (1966) sees the distribution of property rights to peasants at the time of the
French Revolution as among the factors that
knocked France off the trajectory toward
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authoritarianism along which other aspects of

its history were directing it. Peasants became
a mass of small property owners, vulnerable to
economic pressures and so available for radical action, but conservative in other ways.
The Revolution generated ideological traditions hostile to concentration of wealth and
power. In Japan, small farmers acquired title
to their land as a consequence of the US occupation following World War II. This may also
have contributed to democratization, creating
an independent group with an interest to defend. It also created a lobby for protectionism,
and the foundation of the conservative but activist Liberal Democratic Party. By contrast
the Philippines did not have land reform and
was unstable politically after 1945. Germany
was socially transformed by World War II; the
foundations of Junker power were wiped out
by Soviet occupation and participation, and
the divided West was far more Catholic, with
fewer strong areas of traditional Communist
and Socialist power. These changes had a lot
to do with the ability of Japan and Germany
to use effectively the democratic institutions
encouraged by the occupiers.
Throughout this discussion, there has
been recurrent reference to an important
driver of development: war. Economic historians of course know about it, and at
times explore its consequences. For Rajan &
Zingales (2003a) World War I started the
great reversals that deected some civil
law countries from building important equity markets. But war and interstate rivalries do not nd pride of place in most of the
institutionalist or human capital analyses. In
an unpublished manuscript, Hoffman argues
that interstate conict in Europe helped drive
technology, laying the foundations for economic breakthrough, whereas Mokyr (1990)
reverses the causality between technology and
economic change. Hintze (1975) explores the
impact of war on political institutions, nding
that the standing army hindered democracy
in Prussia and its absence helped in England.
Tilly (1992) and Spruyt (1994) give considerable emphasis to warfare in shaping the devel-

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opment of modern Europe. Discussions of the

East Asian miracle countries often refer to
the security elementthe United States support for them during the Cold War (Doner
et al. 2005).
For Hoffman (unpublished manuscript),
war lies at the heart of one of the great comparative puzzles: Why did China start down
the path of technological development (gunpowder, cannon) but hold back from exploration, recalling the eet in the fteenth century just as the Europeans began exploring
and conquering the world? The answer lies in
the reasons for political unity in China, which
suppressed conict within its borders, in contrast to political fragmentation in Western
Europe. In Europe, Anderson (1974a,b) argues, a key variable was the breakup of a
unied Christianity with the Reformation
(Gourevitch 1978).
CONCLUSION: IMPLICATIONS
FOR POLICY AND RESEARCH
The issues of agency and social cleavages in
the literature on economic development bear
directly on policy debates. The smaller the
role of agency in the analysis, the less policy
can make any difference. The longer the duree
(the farther back the discussion extends), the
less deliberate human action seems to impact
outcomes, and the less governments or other
actors can do to alter outcomes.
The strong geography arguments (e.g.,
Diamonds mountain alignments, or distance
from the equator) are low agency, low policy.
And yet from the beginning of human civilizations we can think of deliberate actions
that bend nature to human will. The Fertile
Crescent, which relied on irrigation from the
Tigris and Euphrates Rivers, required extensive collective action. California produces
most US fruit and vegetables thanks to federal
and state water investment; Hong Kong was
built on public infrastructure development;
the state of New York nanced the Erie
Canal even before solving all the technological problems the project would face

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(Bernstein 2005). The more agency, the

greater the challenge to provide accounts of
how the action came about.
The human-capital arguments divide on
agency. Those that explore the impact of cultural attributes often downplay the notion of
choice by not asking where the values come
from or why group members comply. Others,
such as the papers on Jews and on Protestants,
see greater agency by examining historically
specic moments when a norm emerged as the
result of actions taken. If human capital can
be affected by policies toward education, research, intellectual property, culture, and the
way rms spend on worker training, then the
role of agency is quite large.
Institutional arguments vary on agency according to how malleable they nd the institutions to be. Laporta et al. (1997, 1998) have
a single decision point in the creation of legal institutions, so agency is limited. Looking at interest groups, as do Rajan & Zingales
(2003b) and others, reveals a political process with continuous agency. If institutions are
held constant as the frame of preference aggregation, agency can be examined as strategic
interaction within that frame. Policy debates
then involve institutional design to improve
or inhibit policy outcomes.
As institutions themselves become problematic, as exemplied by the distinction between de facto and de jure power (Acemoglu
& Robinson 2005), the agency and policy issues broaden. Institutions cannot be designed
separately from the social sources of power.
Understanding this linkage requires more re-
search on the social power resources and how

they work. Measuring resources is difcult;
furthermore, institutionalist research ts the
dominant culture of the political economy literature in economics, law, and political science, so we should not be surprised that it
is far more advanced. But some social power
resources can be studied: land holding, diversity of economic activity in a country or
region, education, media diversity. Acemoglu
et al. (2007) examine whether political power
in late-nineteenth-century Colombia led to
wealth, or wealth to political power. The policy implications of a social model are explosive. Can we engineer changes in the distribution of power? It has been done (land reform
in Japan; the revolutions of France, Russia,
and China), but often in situations of revolution and war.
Progress toward a fuller account of the political economy of development certainly involves linking together a theory of institutions, a theory of human-capital development,
a theory of the distribution of incentives by
the condition of the world economy, a theory
of international politics noting the impact of
war and military rivalry, and a theory of the social components of political power. We have
seen substantial advances in each of these and
some exploration of the interaction among
them. A stronger attention to issues of agency
would sharpen the discussion about politics
and policy. No agency, no politics, no policy. With some agency, there can be politics,
and policy could matterfor ill as well as for
good.
DISCLOSURE STATEMENT
The author is not aware of any biases that might be perceived as affecting the objectivity of
this review.
ACKNOWLEDGMENTS
I thank the participants at a set of conferences at Princeton, Amsterdam, Stanford, and Brown
on endogenous institutional change and the evolution of nancial institutions. These meetings
included many of the authors cited here, who stimulated this paper by inviting me to very
interesting discussions. I also thank my colleagues at the UCSD international relations seminar,
153
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where we discussed some of the key papers. For comments on drafts, I owe special thanks to
Eli Berman, Arthur Goldhammer, Philip Hoffman, Miles Kahler, Peter Katzenstein, David
Lake, Margaret Levi, James Robinson, Jean-Laurent Rosenthal, and Sebastian Saiegh, and for
conversations I thank Craig McIntosh, Stephen Haber, and Eric Van Young. And my deep
appreciation goes to the late John McMillan, for many conversations and for urging me several
years ago to write up my doubts on the single-shot causal model of the legal family argument,
and to the late Kenneth Sokoloff, one of the leaders of this eld, stimulating in person as well
as in word.

LITERATURE CITED
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Discursive Institutionalism: The Explanatory Power of Ideas

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The Mobilization of Opposition to Economic Liberalization
Kenneth M. Roberts p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p327
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Macartan Humphreys p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p351
The Concept of Representation in Contemporary Democratic Theory

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What Have We Learned About Generalized Trust, If Anything?
Peter Nannestad p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p413
Convenience Voting
Paul Gronke, Eva Galanes-Rosenbaum, Peter A. Miller, and Daniel Toffey p p p p p p p p p437
Race, Immigration, and the Identity-to-Politics Link
Taeku Lee p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p457
Work and Power: The Connection Between Female Labor Force
Participation and Female Political Representation
Torben Iversen and Frances Rosenbluth p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p479
Deliberative Democratic Theory and Empirical Political Science
Dennis F. Thompson p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p497
Is Deliberative Democracy a Falsiable Theory?
Diana C. Mutz p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p521
The Social Processes of Civil War: The Wartime Transformation of
Social Networks
Elisabeth Jean Wood p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p539
Political Polarization in the American Public
Morris P. Fiorina and Samuel J. Abrams p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p563
Indexes
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Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.

The Role of Politics in

Annu. Rev. Polit. Sci. 2008. 11:13759

First published online as a Review in Advance on

agency, institutions, human capital, choice, political development

The Annual Review of Political Science is online at

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

What is the role of politics in shaping economic development? Economic historians

2002) or technology and birth rates since 1800

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

on their behavior, but we cannot speak of intentionality, deliberateness of action, choices

THE DEGREE OF AGENCY:

dominant cultural-racial groups? The answer

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

tural argument of Guns, Germs and Steel, such

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

harsh weather (ooding, monsoons) in the

The shift, argue Galor & Moav (2002), came

than are modern high income economies.

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

Prior to about 1800, population growth

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

a religious/ethnic group and an attribute (e.g.,

learning. Individuals then chose between a

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

by specic actors. The decision points can be

money. Korea and Taiwan spread training

branch of argumentation stresses institutions

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

law, but after that, no choices or actions, no

interwar years, and the wartime economies of

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GETTING SOCIETY RIGHT

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model strips the number of actors to two. Like

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specicity are vulnerable to economic shocks

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

example of the former, the United States and

Political-Action Capacity of Actors

ment, president, courts, etc.), whereas de facto

authoritarianism along which other aspects of

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opment of modern Europe. Discussions of the

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(Bernstein 2005). The more agency, the

search on the social power resources and how

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Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

Griliches Z. 1957. Hybrid corn: an exploration in the economics of technological change.

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Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

Annu. Rev. Polit. Sci. 2008.11:137-159. Downloaded from www.annualreviews.org

www.annualreviews.org Politics in Economic Development

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Volume 11, 2008