Customer Reviews

Understanding the Process of Economic Change (Princeton Economic History of the Western World)

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Having attended several lectures by Dr. North I know him to be a brilliant man, but not the most engaging communicator.

This book has a small summation of several important ideas of the role of uncertainty and technological change, and how economic actors move to adapt to these. Nothing could be more topical these days. Unfortunately, I find the writing unnecessarily dense and even the simplest issues are treated in a verbose manner. I always love reading Hayek, Friedman, Mandelbrot and so many others; but despite my great interest in the subject reading this book was a chore.

Only for the technical experts or very motivated enthusiasts.

North starts his book out emphasizing the important role played in economic development by the uncertainty of the future that impacts the decision makers whose actions will create technological and institutional change over time.This uncertainty is the uncertainty emphasized by Schumpeter,Keynes,Knight,Ellsberg,and Mandelbrot( or mild risk versus wild risk),as opposed to the risk emphasized by neoclassical economics in the form of the standard deviation of a normal probability distribution.Throughout the book North correctly emphasizes uncertainty and not risk as being the environment in which decision makers make choices that will determine future economic growth and change.Unfortunately,North devotes only one small paragraph on p.13 to this vital distinction(uncertainty versus risk).North needs to have spent much more time and pages carefully covering this distinction since it is crucial to understanding the process of economic change .North needs to provide the reader with at least two chapters devoted to covering the risk versus uncertainty topic.The only readers who will benefit from this book would be readers who have already read the relevant works of Knight ,Keynes,Schumpeter,Ellsberg,and Mandelbrot that deal with this topic.I would recommend that a potential reader first cover chapters 7 and 8 of Knight's 1921 book,Risk,Uncertainty and Profit ,and then read chapter 7 on the business cycle from Schumpeter's 1912 book The Theory of Economic Development.North needs to substantially revise the book .His preliminary chapter on cognitive psychology can be filled out more completely once he has added the chapters on uncertainty and its impact on the irreversible nature of investment in long run,long lived, physical,durable capital goods which is " cast in concrete " and essentially irrevocable.

I think everyone interested in general business, economics or business strategy should read this book. For some a topic as big as the one Professor North is tackling here might require thousands of pages and a great deal of analytical complexity.

Most students of economics recognize Nobel Prize winner Douglass North and his work. As a specialized student of management, finance and accounting, I am not qualified to analyze the work in relation to its place in the professional field of economics -- although I understand its intentions and direction. My review rather focuses on the relevance of Professor North's statement in this book as a guide for my students of corporate strategy, business policy, finance and accounting; including as well my many clients in executive positions and the practice of law.

The systems view of economic change provided by Professor North casts light on long-term organizational thinking and helpful to our search for corporate and business strategy models in the increasingly efficient capital market environment revealed by modern financial economics.


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