- Paperback: 240 pages
- Publisher: W. W. Norton & Company; unknown edition (October 17, 1982)
- Language: English
- ISBN-10: 039395241X
- ISBN-13: 978-0393952414
- Product Dimensions: 5.6 x 0.7 x 8.3 inches
- Shipping Weight: 11.4 ounces (View shipping rates and policies)
- Average Customer Review: 4.3 out of 5 stars See all reviews (12 customer reviews)
- Amazon Best Sellers Rank: #9,125 in Books (See Top 100 in Books)
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Structure and Change in Economic History unknown Edition
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Top customer reviews
The reason I am not rating this higher is I find that a lot of the information in there are known. Anybody that graduate high school will have learn or heard of the majority of the concepts in this book. I am a bit disappointed that this book did not challenge my thinking/ The author is very credible and has knowledge in the field. This book probably be better for someone in highschool or middle school.
North asserts that, in the prehistoric era, human population increase would lead to declining labor productivity as resources were exhausted. New technologies could increase productivity but, if property rights were nonexclusive, as they must have been in a nomadic hunter-gatherer society, new technologies would simply accelerate resource depletion. Only if a tribe or band could exclude rivals from exploiting the resource, as they could in a settled agricultural society, would the productivity gains from new technology be sustained. The advantage that agriculture offered, then, was the opportunity to establish exclusive communal property rights. This produced what North calls the first economic revolution.
The first economic revolution, occasioned by the rise of agriculture, produced the state, "the most fundamental achievement of the ancient world." The state specialized in providing security, keeping order within societies and protecting them from outside threats, while the complex demands of an agricultural economy (compared to those of a hunter-gatherer economy) required increased specialization throughout the rest of society as well. Over time, new military technologies led to larger states and more representative forms of government as rulers were forced to make concessions to their constituents to compete militarily with other rulers.
The industrial revolution, which North refers to as the second economic revolution, was largely a result of better specified and enforced property rights that raised the private returns to invention and led to an invention "industry." The industrial revolution brought tremendous gains in the standard of living but required new institutions to achieve gains from specialization without losing them to attendant transaction costs.
North notes that transaction costs would be prohibitive without a normative system that encourages compliance with contractual obligations. Accordingly, concurrent with the industrial revolution, we see a concerted effort by elites to inculcate the values of hard work, thrift, and sobriety among the working classes. In fact, North has reflected deeply on the role of ideology in an industrial society. Changes in knowledge and technology affect relative prices and thus affect perceptions of fairness. Differences in occupation or geographic location also give rise to different perceptions of how output should be distributed. "Ideological entrepreneurs" capitalize on these different perceptions. Successful ideologies must provide an explanation of history that plausibly accounts for current conditions. Ideologies must be flexible so that they can attract new adherents and accommodate changed conditions. Most importantly, to effect change, successful ideologies must overcome the free rider problem. Their ability to do so will be inversely related to the legitimacy of existing institutions.
An interesting question asked early on in the book is, why do states persistently fail to establish property rights that would permit high rates of economic growth? He explains that states first maximize returns for the ruler and then, subject to this constraint, try to reduce transaction costs throughout the economy. Where the ruler is an individual or the representative of a small elite group, the interests of rulers will not normally coincide with those of society as a whole.
Structure and Change in Economic History offers considerable insight into fundamental historical forces. It will come as no surprise to those who have read this work that North won the Nobel Prize for Economics in 1993 for his use of economic theory and quantitative methods to explain economic and institutional change.
North describes the status of early humans. Because of the absence of property rights to goods and land, humans struggling for survival exploited common property, for example hunting the same game without concern for replenishment of the animals, in much the same way that we currently over-fish our current oceans. When there are not property rights defined to include oceans, for example, each fisherman has little or no incentive to maintain a sustainable number of fish. If a fisherman does not fish today (in hopes of replenishing the supply of fish), this just gives a competitor the opportunity to capture the same fish on the same day, with no net improvement in the number of fish. So the ocean becomes (and has become) depleted.
This "tragedy of the commons" -- because of no ownership of our oceans (or in the case of our ancestors, no ownership of land)-- led to a Malthusean existence for our ancestors, without the opportunity to improve land by investing in it (for example by not over-hunting or over-fishing.)
The invention of government in early agricultural societies, even if exploitative, created a near monopoly on the use of force that subsequently allowed delineation of agricultural property, decreasing the propensity of people to steal from each other's property. The leader (with the monopoly on force) wanted some delineation of property (some establishment of property rights) because it created some individual incentive to improve the land (and incentive to think of ways to improve the land). The leader ended up with more because he could tax the now more productive land. This agricultural revolution -- because of the establishment of property rights to land -- North calls the first economic revolution.
North's insight, as well as that of other property right economists is that historically, those societies that were able to establish systems of property rights that enabled the easiest cooperation between people in terms of exchange of ideas and goods (economists call this "decreasing transaction costs") were those that grew the most rapidly, ultimately because of the growth of knowledge facilitated by exchange.
North points out that selfishness certainly interferes with this, as leaders with a monopoly on the use of force can use that force, not to create the most efficient property rights systems, but rather to force their subjects to give them as much as is possible from taxation, while they still maintain power.
But this power is not infinite, because leaders who use their monopoly on the use of force to inhibit too much the growth of their economies (by too high a tax rate) can fall victim to outside societies that become stronger for not exploiting as much. Or subjects in more exploitative economies can find some way of leaving the protection of one ruler to seek protection from another ruler, whose society has a somewhat more efficient (from the point of view of the person laboring) property right system.
So property right systems at least have the capacity to evolve to be more efficient; that is, to enable greater cooperation between people in sharing political and economic and (much later) scientific ideas; thus increasing the knowledge of society and therefore its productivity.
Indeed the second economic revolution (the industrial revolution) occurred (according to North) because of Enlightenment ideas that encouraged free economic and political exchange which led to even greater refinement in property right definitions and enforcement. These more efficient property rights created more productive exchange and large increases in the growth of societies.
I conceptualize that a world in which evolving property rights become more efficient over time is a world in which knowledge of how to create economic knowledge is being created, though North does not explicitly say that.
The idea implicit in this brilliant book is that the proper role of government is to create an arena in which cooperation between people ("exchange") is as efficient as possible, so that individual creativity can increase productivity and therefore improve the health and safety and happiness of citizens.
We have come a long way since pre-agricultural society, but obviously have a long way to go.