02 2011 HA JOON CHANG Institutions and Economic Development - En.pt

Jornal de Economia Institucional (2011), 7: 4, 473-498
©C A Fundação JOIE 2010 doi: 10,1017 / S1744137410000378 Primeiro publicado on-line 15
de outubro de 2010
Instituições e desenvolvimento econômico: teoria, política

e história
HA JOON CHANG *
Faculdade de Economia da Universidade de Cambridge, Sidgwick Avenue, Cambridge CB3 9DD, UK
Abstrato: The article tries to advance our understanding of institutional economics by critically examining
the currently dominant discourse on institutions and economic development. First, I argue that the
discourse suffers from a number of theoretical problems – its neglect of the causality running from
development to institutions, its inability to see the impossibility of a free market, and its belief that the
freest market and the strongest protection of private property rights are best for economic development.
Second, I point out that the supposed evidence showing the superiority of ‘liberalized’ institutions relies
too much on cross-section econometric studies, which suffer from defective concepts, flawed
measurements and heterogeneous samples. Finally, I argue that the currently dominant discourse on
institutions and development has a poor understanding of changes in institutions themselves, which often
makes it take unduly optimistic or pessimistic positions about the feasibility of institutional reform.
1. Introduction
Once amarginal topic, the role of institutions has become one of themost popular research areas in
development economics over the last 10–15 years. Influenced by the broader revival of interest in
institutions in economics, represented by the rise of New Institutional Economics in the 1980s,
institutions started gaining popularity by the early 1990s as an explanation of international differences
in economic development, even in places such as the World Bank and the International Monetary
Fund (IMF), which had been rather hostile to the notion (Stein, 2008: 38–42). However, it is from the
late 1990s that institutions have moved to the centre stage in the debate on economic development.
Since the late 1990s, the view that poor-quality institutions are the root cause of economic
problems in developing countries has become widespread. In accordance, the IMF and the World
Bank started to impose many ‘governancerelated conditionalities’, which required that the borrowing
country adopts ‘better’ institutions that improve ‘governance’ (see Kapur and Webber, 2000). Around
the same time, many rich country governments also started to attach governance conditionalities to
their bilateral aids. There is no agreed definition
∗ Email: [email protected]
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474 HA- JOON CHANG
of what these ‘better’ institutions, often called the Global Standard Institutions (GSIs), are. However,
they are institutions that are typically found in AngloAmerican countries, which are seen as
maximizing market freedom and protecting private property rights most strongly. 1
The pressure for the adoption of GSIs by developing countries also came from various bilateral,
regional, and multilateral trade and investment agreements, which startedmushrooming from the
mid-1990s. For example, theWTO (World Trade Organization) has forced developing countries to
adopt American-style intellectual property rights (IPRs) laws through the trade-related intellectual
property rights (TRIPS) agreement. For another example, the notorious chapter 11 of the NAFTA
(North American Free Trade Agreement) has completely changed the institution throughwhich
themember-country governments regulate corporations. Unprecedentedly, it allows foreign investors
to sue host-country governments directly in case they think that they have been expropriated by the
government, not just directly through confiscation but also indirectly through profit-reducing
regulations.
In addition to loan/aid conditionalities and international rules, developing countries have been
increasingly subject to more informal pressures to adopt GSIs. Not only the World Bank and the IMF,
but also the OECD (Organization for Economic Cooperation and Development), the G7, the World
Economic Forum, and many other think-tanks and policy forums that are dominated by the rich
countries have promoted the view that developing countries should adopt GSIs. The international
financial press routinely paints countries with nonAnglo-American institutions, including many
developed countries, as lacking in institutional quality. 2 These negative comments by the press have
come to be taken more seriously by developing countries in the recent period because the
1Themost frequentlymentioned are: (i) a common law legal system, which, by allowing all transactions unless explicitly prohibited, promotes
free contracts; (ii) an industrial system based on private ownership, which requires significant privatization in many countries; (iii) a financial
system based on a developed stock market with easy M&A (mergers and acquisitions), which will ensure that the best management team
available runs each enterprise; (iv) a regime of financial regulation that encourages ‘prudence’ and ‘stability’, including a politically independent
central bank and the strict observance of the BIS (Bank for International Settlements) capital adequacy ratio; (v) a shareholder-oriented corporate
governance system, which will ensure that the corporations are run for their owners; (vi) a flexible labour market that allows quick re-allocation of
labour in response to price changes; (vii) a political system that restricts arbitrary actions of political rulers and their agents (i.e., bureaucrats)
through decentralization of power and the minimization of discretion for public sector agents (for theoretical and empirical criticisms of the GSI
discourse, see Chang, 2005).
2 Despite these pressures, the institutions in non-Anglo-American developed countries have proved quite durable, partly because those
whowere putting such pressures on these countries did not have enough financial leverage over them, while the forces defending the existing
institutions were quite strong. So, the institutional differences between rich countries still remain very large, even though they may have been
somewhat reduced, compared to the period between the end of the Second World War and the rise of neo-liberalism in the 1980s. On the
institutional diversity of capitalism, see Albert (1991), Streeck (1992), Chang (1997), and Hall and Soskice (2001).
Institutions and economic development 475
increasing opening of their capital markets has significantly increased the power of foreign investors,
who are strongly influenced by the international financial press.
Of course, the above discussion of external forces is not to say that there were no internal
pressures for the adoption of GSIs in developing countries. GSIs are institutions that inherently favour
the rich over the poor, capital over labour, and finance capital over industrial capital. Therefore, many
rich people, especially financial capitalists, in developing countries have been very much in favour of
GSIs. Also, some of the free-market ideologues in developing countries were even more dogmatic
than the ones from the rich countries in a manner that the Latin Americans describe as being ‘more
Catholic than the Pope’.
Being encouraged by and stimulating the increasing demands for institutional reform in developing
countries was the explosive growth in the academic research on the role of institutions in economic
development. Sometimes such research was provided from within the organizations making such
demands – the best examples being the ‘Governance Matters’ paper series (Mark I published in 1999
andMark VIII published in 2009 by the research group led by Daniel Kaufmann; see Kaufmann et al., 1999,
2002, 2003, 2005, 2006, 2007, 2008, 2009) and the annual Doing Business reports, both published
by the World Bank. However, a lot of this was supplied by academic economists, sometimes in direct
response to real-world demands but also influenced by the academic fashion and the high
publishability of a relatively new research topic.
In this article, I try to critically evaluate the currently dominant discourse on the relationship
between institutions and economic development, which argues that institutions that maximize market
freedom and most strongly protect private property rights are the best for economic development.
While firmly believing that markets and private property are essential institutions for economic
prosperity, I first point out in the article that the understanding of the relationship between the
institutions of private property and markets, on the one hand, and economic development, on the
other hand, found in the dominant discourse is rather simplistic. I then go on to argue that the
empirical evidence behind the dominant discourse may look rather impressive on a first look but that it
does not survive a more careful scrutiny very well. This is followed by a discussion on how the
currently dominant discourse on institutions and development suffers from a rather deficient theory of
how institutions themselves change.
2. Os problemas teóricos com o discurso dominante sobre instituições e desenvolvimento

econômico
O discurso atualmente dominante sobre instituições e desenvolvimento sofre de duas categorias de

problemas teóricos. A primeira é que quase
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476 HA JOON CHANG
assume com exclusividade que a causalidade vai de instituições para o desenvolvimento econômico,
ignorando a possibilidade importante que o desenvolvimento econômico muda instituições. Em segundo
lugar, mesmo quando nos concentramos na parte 'instituições para o desenvolvimento' da causalidade, a
relação é teorizado em uma linear, e forma bastante simplista, estática.
Não melhores instituições levar a um desenvolvimento econômico mais eficaz?
A visão atualmente dominante é que as instituições são os determinantes fundamentais da performance

económica (por exemplo, para as mais recentes declarações ao longo desta linha, ver Acemoglu et al., 2005;
Norte, 2005). No entanto, a causalidade na outra direção - isto é, do desenvolvimento econômico para
instituições - é geralmente negligenciada. 3
Economic development changes institutions through a number of channels. First, increased wealth
due to growth may create higher demands for higher-quality institutions (e.g., demands for political
institutions with greater transparency and accountability). Second, greater wealth also makes better
institutions more affordable. Institutions are costly to establish and run, and the higher their quality the
more ‘expensive’ they become (see below). Third, economic development creates new agents of
change, demanding new institutions. In the 18th century, the rising industrial capitalists supported the
development of banking against the opposition to it by landlords, while in the late 19th and the early
20th centuries, the growing power of the working class led to the rise of the welfare state and
protective labour laws, against the capitalists who thought those institutions would bring about the end
of civilization as they knew it.
Indeed, there is quite a lot of historical evidence to suggest that the causality may be stronger in
the latter direction (economic development improving institutions) than in the former (better institutions
promoting economic development). Today’s rich countries acquired most of the institutions that
today’s dominant view considers to be prerequisites of economic development
after, not before, their economic development – democracy, modern bureaucracy, IPRs, limited
liability, bankruptcy law, banking, the central bank, securities regulation, and so on (Chang, 2002a:
chapter 3). More specifically, the AngloAmerican countries, whose institutions today are considered to
be GSIs, themselves did not have most of those institutions in their earlier stages of development and
acquired most of them only after they became rich (Chang,
2005).
3 Acemoglu et al. ( 2001) is a partial exception – exception in the sense that it does recognize the
two-way nature of the relationship at a theoretical level but only a partial exception in that it goes on to conclude, through the use of an
instrumental variable, that empirically the causality basically runs from institutions to development.
If the causality runs more strongly in the direction of development to institutions, rather than the
other way around, the financial and human resources that developing countries are expending in
order to acquire GSIs may be better used for other policies that more directly stimulate economic
development – be they educational expenditure, infrastructural investments, or industrial subsidies –
especially when they also indirectly promote institutional development, which can then further
promote economic development.
Further complicating the picture regarding causality is what may be called the ‘late-comer’ effect
(Chang, 2002a: chapter 4). In the same way in which they can import better technologies without
having to pay the full cost of developing them, late-comer countries can import superior institutions
without having to pay for their development. Therefore, today’s developing countries tend to have
institutions that are more developed than what their standards of material development would strictly
demand, making it difficult to identify the exact relationship between institutions and development.
Given all of this, by almost exclusively looking at one direction of causality, that is, from institutions
to economic development, the currently dominant discourse on institutions and development gives us
only a partial picture. We need to look at the causality in the other direction as well, if we are to have a
full understanding of how institutions and economic development interact with each other and give the
right policy advice.
Are liberalized institutions better for economic development?

Even restricting the direction of causality to the one running from institutions to economic
development, the theories about the relationship between the two that the currently dominant
discourse on institutions and development provides are rather simplistic.
These theories basically argue that ‘liberalized’ (or what most Europeans may call ‘liberal’)
institutions that protect private property rights most strongly and provide maximum economic freedom
(especially business freedom to seek profits) will best promote investment and thus economic growth
(e.g., Acemogul
et al., 2001; La Porta et al., 2008). So, for example, the (Anglo-American) common-law legal system is
seen as more encouraging of enterprise, and thus economic growth, than the (Continental, especially
French) civil-law system because it provides better protection of investors and creditors while
minimizing state regulation. For another example, it is argued that a shareholder-oriented (once
again, essentially Anglo-American) corporate governance system promotes investment and thus
growth by giving assurance to investors that they will not be ripped off by other stakeholders in the
company they invest in – the managers, the workers, and the suppliers, who will get the same fixed
compensation regardless of the profit performance of the company and thus have no incentive
tomaximize profit. However, the relationship between institutions and economic development is far
more complex than that.
478 HA- JOON CHANG
Do institutions that provide greater economic freedom lead to faster growth?

Let us first examine the proposition that institutions that guarantee the highest degree of economic
freedom will be the best for promoting economic growth and development. 4
To begin with, even if we agree that the freest market is the best for economic development, there
is actually no objective way to determine what is in fact the freest market (for a further theoretical
exploration of this point, see Chang, 2002b; for empirical details of the following examples, see
Chang, 2002a).
If you want the freest financial market, should we allow people to set up banks without minimum
amount of capital and issue their own currency? The followers of the American free-banking school
would say so, while others, including many free-market economists, would say that we should not.
Should a country pursuing the maximum degree of freedom in the labour market allow child labour?
That is what 19th century free-market economists thought, but today few defenders of free labour
market in the rich countries would say that. Until the early 20th century, many people thought it
unacceptable for the government to put any legal limits to working hours, at least of adult men – for
example, in
1905, the US Supreme Court ruled a New York state law limiting the working hours of the bakers to
10 hours as unconstitutional because it ‘deprived the baker of the liberty of working as long as he
wished’ (Garraty and Carnes, 2000: 607). Today, most people would accept such restriction as
perfectly normal. In the 19th century, most free-market economists thought that patents, by restricting
competition in the markets for ideas, goes against free-market principles. Today, many, although not
all, of them defend patents.
These examples show that the very definition of a free market depends on whether an observer
accepts the political and ethical values embodied in the institutions that gird the market. In other
words, different people with different values will see different degrees of freedom in the same market.
If it is impossible to objectively define the boundary of the free market, we cannot know which
institutional arrangements will maximize economic freedom (whatever its impact on economic growth
and development may be).
Second, even ignoring the impossibility of objectively defining the free market, various theories tell
us that an institutional structure that gives maximum business freedom is unlikely to be the most
efficient from the social point of view. This is said not just by heterodox economists but also by
neoclassical economists in the market-failure tradition. For a classic example, accepted by many
mainstream neoclassical economists, allowing business to acquire any
4 Não vou entrar no complexo e dif questão fi cult sobre a relação entre o crescimento económico eo desenvolvimento económico. Su fi ce
dizer aqui que o crescimento econômico, pelo menos quando ele é gerado por uma transformação da estrutura produtiva da economia, é o
principal motor do desenvolvimento econômico e, portanto, que o desenvolvimento económico sem crescimento econômico é impossível,
embora o crescimento econômico sem desenvolvimento econômico é possível, se não desejável ou sustentável. Para uma crítica do conceito
predominante de hoje do desenvolvimento, ver Chang (2010).
Instituições e desenvolvimento econômico 479
empresa que quer pode levar a um grau de monopólio que pode ser bom para a empresa em causa, mas
impõe custos sociais de monopólio. Para outro exemplo, a crise financeira global de 2008 fi mostrou que
dando financeiro fi rma a liberdade para acumular risco individual sem levar em conta o risco sistêmico é
de fi nitivamente não é bom para a economia em geral.
Third, it is not even that giving maximum freedom to business firms is good, at least for the
business sector as a whole. There are regulations that may restrict business freedom in the short run
but may promote the long-term interest of all firms. For example, individual firms may benefit from
using child labour (and thus child labour regulation will hurt them) in the short run, but that may harm
all firms in the long run, by harming children’s health and education and thereby reducing the quality
of the future labour force. In this instance, it will be actually pro-business for the government to
regulate child labour and many capitalists would support it – they do not mind accepting such a
regulation as far as the government ensures that every company respects it. In other words,
restricting individual business freedom may be good for the business sector itself, especially in the
long run, regardless of its impact on the rest of the economy.
Em quarto lugar, é altamente discutível se uma maior liberdade de mercado é melhor para o
desenvolvimento econômico. Para começar, como mostra a Lipsey-Lancaster Second Best Teorema, não
podemos julgar a priori se um maior grau de liberalização do mercado trará resultado em (alocativa)
eficiência, a menos que todos os mercados estão completamente liberalizado (Lipsey e Lancaster, 1956).
Além disso, mesmo se uma economia mais liberalizada é allocatively mais eficientes, não pode-se
argumentar que tal vontade economia cresce mais rápido, como até alguns economistas neoclássicos
proeminentes admitir (por exemplo, Krueger, 1980). Além disso, há muitas teorias econômicas
não-neoclássicas que dizem que os mercados livres pode ser menos bons em gerar crescimento de
mercados que são, dependendo das circunstâncias, protegido, regulamentada, gerida, ou monopolizado -
como o argumento da indústria nascente de Alexander Hamilton (1789) e Friedrich List (1841; List, 1885),
(1987) teoria da inovação de Joseph Schumpeter, ea literatura mais recente sobre a economia da
tecnologia (ver Freeman, 1982; Nelson e Winter, 1982; Lundvall, 1992; Lall e Teubal, 1998; Kim e Nelson,
2000; Cimoli et al., 2009).
Is a stronger protection of private property rights better for growth?

Similar things can be said about the proposition that a stronger protection of private property rights is
better for growth. The currently dominant discourse on institutions and development assumes that this
proposition is indisputable, but there are a number of reasons to question it.
First of all, the currently dominant discourse fails to give full attention to forms of property rights
other than private, state, and open-access. The superiority of private ownership is asserted on the
around that state ownership is inefficient due to the restrictions on competition and the principal–agent
problem, while
480 HA- JOON CHANG
open access leads to the ‘tragedy of commons’. However, in reality, there is a wide variety of property
rights not fitting into this scheme. One example is the communal property right over common-pool
resources with ‘public goods’ characteristics. Research, notably by Ostrom (1990, 2007), shows that
what may look like an open-access property rights system (e.g., village forest) often in fact involves
intricate rules on who can do what and when. The recent debate on ‘shareware’ has also shown how
this involves a communal property rights system, where there are rules on how people can use it
(e.g., they cannot make commercial gains with versions of the software that they have improved).
There are also hybrid forms of property rights. The agricultural cooperative, which combines private
property in some inputs (e.g., land, livestock) with communal property in others (e.g., creamery,
tractors), is a classic example. The so-called township and village enterprise (TVE) of China is
another, more recent, example. The ultimate ownership control of TVEs remains with the local states
(townships and villages), but they are often run as if they are privately owned – by the local political
bosses and enterprise managers.
Second, there are many theories that showwhy state or communal ownerships may be superior to
private ownership in achieving social efficiency and economic growth under a range of circumstances,
and the evidence to back them. I have already discussed the case of communal ownership, but
various theories of market failure – especially capital market failure, natural monopoly, and
externalities – show that state ownership may be more efficient in certain circumstances (for a review
of these theories, see Chang, 2008). Indeed, there are many examples of state-owned enterprises
(SOEs) in countries such as Singapore, France, Finland, Norway and Taiwan that were not just
efficient in the narrow allocative sense but also led their country’s economic growth process through
technological dynamism and export successes (for further details, see Chang,
2008).
Third, as emphasized by Hodgson (2009), the very notion of ‘property’ – not mere possession but
institutionalized possession – is based on the existence of a third-party that can legitimate, adjudicate
and enforce the relevant rights of the property owners. This means that the relationship between
private property owners and the state cannot be seen as an antagonistic one, as it is typically
assumed in the dominant discourse. For example, the Singaporean state is well known as a strong
state that protects private property rights very well. However, the very strength of the Singaporean
state that enables it to offer such protection is founded upon a very high degree of state ownership.
First, the Singaporean state’s strength owes a great deal to its strong fiscal position thanks to highly
efficient SOEs, which collectively produce over 20% of the country’s GDP. Second, an important
basis for the Singaporean state’s high political legitimacy is its ability to supply high-quality affordable
housing, which in turn is possible because it owns all the land in the country and operates a giant
public housing corporation that supplies 85% of the country’s housing. In other words, a high degree
of
state ownership may in some cases be exactly what enables the country to offer strong protection of
private property rights.
Finally, and perhaps most importantly for our purpose here, even if we focus only on private
ownership, we cannot say that a stronger protection of private property rights will lead to higher
investment and thus higher growth. It will depend on the kinds of property rights that are being
protected. For example, strong protection of landlord property rights has proven harmful for economic
development in many – although not all – countries. For another example, an excessive protection of
the holders of company shares and other liquid assets can actually reduce real investment and thus
growth, by putting short-term pressures on the managers, who have to cater to the impatience of
highly mobile asset owners. For yet another example, as we have seen in the recent financial crisis, if
wrong kinds of assets are created, more strongly protecting investor rights may actually harm
economic growth.
Is the relationship between institutions and economic development always the same?
In addition to being simplistic about the way in which institutions can affect economic development,
today’s dominant discourse on institutions and development fails to recognize that the relationship is
not linear, differs across societies, and changes over time even in the same society.
First, even if an institution in some dose promotes growth, it may actually hamper economic
growth in a larger dose. So, while some protection of property rights is absolutely necessary for there
to be investment and growth at all, an overly strong protection of property rights may reduce growth.
This point has been highlighted by the recent debate on IPRs. The debate has revealed that, while
some protection of IPRs may be necessary to motivate firms to invest in knowledge generation, at
least in certain industries (e.g., chemicals, pharmaceutical, software), too much protection of IPRs
may be bad for the society (Chang, 2001; Stiglitz, 2007: chapter 4). A stronger protection of IPRs
increases the costs from (artificial) monopoly, which may more than offset the benefits from greater
innovation that it may (but then may not, as innovation is an inherently uncertain process) bring.
Moreover, if excessive, protection of IPRs may hinder innovation itself by making technological
diffusion overly costly, by preventing cross-fertilization of ideas and by increasing the chance of
technological deadlock caused by disputes between holders of inter-related patents (Chang, 2007a:
chapter 6).
Second, even the same institution in the same dose may be good for one country but bad for
another. So, using the IPR example again, a level of protection of IPRs that may bring net benefit to a
rich country may be harmful for a developing country. Whatever the exact level of IPRs protection is,
a developing country is likely to have few economic agents capable of responding to the incentives
provided by the protection through technological innovation.
482 HA- JOON CHANG
At the same time, it has to pay, in proportional terms, higher costs of IPR protection (e.g., licensing
royalties) than the rich countries have to, given that it owns few patents and other intellectual property
(Chang, 2001). So what is an optimal degree of IPR protection for a developed country may be too
strong for a developing country, and vice versa.
Third, even in the same dose and in the same country, the same institutionmay promote growth at
one point in time but not in another. For example, it is widely agreed that concentrated land ownership
promoted agricultural development in Japan until around the First World War, when landlords were
personally involved in cultivation and thus invested in irrigation and technological improvement, but
that it then turned into an obstacle to development after the First World War, as most landlords
became absentees who were not interested in investing in raising agricultural productivity (FAO,
1966). This meant that the over-riding of landlord property rights in the post-Second World War land
reform helped subsequent economic development of Japan, while the same exercise in the late 19th
century would have had negative economic consequences. One does not have to be a Marxist to see
that institutions (or the relations of production inMarxist terms) that once promoted the development of
a society’s productive capabilities (or the forces of production in Marxist terms) can turn into an
obstacle to it over time.
Observações finais
Mostrei que institucional dominante teorias têm um altamente
compreensão problemática da relação entre instituições e desenvolvimento econômico. Primeiro, eles mais ou
menos ignorar os impactos do desenvolvimento econômico sobre instituições e concentrar-se exclusivamente
sobre a forma como as instituições afetam o desenvolvimento. Em segundo lugar, eles acreditam que as
instituições que proporcionam um maior grau de liberdade comercial e maior proteção dos direitos de
propriedade privadas levar a um crescimento mais elevado, quando há muitas teorias, incluindo algumas
teorias neoclássicas, que argumentam em contrário. , teorias institucionais tradicionais terceiros ver
erradamente a relação entre instituições e desenvolvimento econômico como linear e uniforme através do
tempo e espaço. Estes são graves deficiências de teorias que se propõem a oferecer explicações de
crescimento e mudança estrutural em todo o mundo durante longos períodos de tempo.
3. E as provas?
Não importa a teoria, os interlocutores do discurso dominante pode argumentar, não há evidência empírica suficiente
para mostrar que as instituições que proporcionam um maior grau de liberdade de contrato, limitar de forma mais
rigorosa o poder do governo, e melhor proteger a propriedade privada - ou o que nós pode chamar instituições
'liberalizados' - são melhores em promover o crescimento. Tanto quanto sabemos que estas instituições funcionam,
pode-se argumentar, por que devemos nos preocupar, mesmo que não pode compreender plenamente
why they work? Why do we not just get on with it and implement these good institutions in as many
countries as possible?
Indeed, there is by now a huge amount of cross-section econometric studies showing that there is
a correlation between the degree of ‘liberality’ of institutions and economic growth across countries
(for some reviews of the relevant literature, see Aron, 2000; Chang, 2007b; La Porta et al., 2008).
However, as I shall show below, the evidence is a lot shakier than what the supporters of the
dominant view want us to believe.
Cross-section versus time-series
To begin with, most of the evidence provided in the dominant discourse is from cross-section
econometric studies. Very few studies look at the relationship between institutional changes and
growth over time in the same country.
Does this matter? I think it does.
Given that the relationship between institutions and development is almost certain to differ across
countries (see above), ‘time-series’ evidence may offer better insights than can cross-section studies,
which lump every country from Swaziland to Switzerland, as we development economists like to say.
This means that time-series evidence should also be looked at.
Now, given that the relationship is complex, even the ‘time-series’ evidence cannot simply be of
econometric kind, which cannot capture complexities that characterize the domain of institutions, but
should include historical narratives and comparative historical studies. And there is some pretty strong
time-series evidence against the dominant theory of institutions and economic development,
especially if do not confine ourselves to econometric evidence.
First, economic growth has fallen rather dramatically in developing countries of Sub-Saharan
Africa and Latin America, which have, under enormous external pressures, rather faithfully reformed
their institutions in the neo-liberal direction during the last three decades. They were growing much
faster in the 1960s and the 1970s, when they lacked those ‘liberalized’ institutions. 5 Especially when
we consider that these institutional reforms were preceded and accompanied by supposedly ‘good’
policies of liberalization and opening-up (see above), it is difficult to avoid the conclusion that
institutional reform along the neo-liberal line may not help growth.
Second, take the case of Korea. Being one of the countries hit by the 1997Asian financial crisis,
Korea was told by the IMF, the US Treasury and other creditors to introduce a sweeping institutional
reform and adopt GSIs, especially in relation to finance and corporate governance. However,
following these reforms, the country’s trend growth rate has fallen, rather than risen, quite dramatically
–
5 Between 1960 and the 1980s, per capita income in Latin America grew at 3.1% per year and that in Sub-Saharan Africa at 1.6%. Between
1980 and 2009, the growth rates fell to 1.1% per year and 0.2% per year, respectively (my own calculation based on data from the World Bank
and the United Nations).
484 HA- JOON CHANG
per capita income growth fell from around 6% per year in the preceding four decades to less than 4%
after the crisis.
Third, between the end of the SecondWorldWar and the rise of neo-liberalism in the late 1970s,
the rich capitalist countries introduced or strengthened a host of regulatory institutions – tougher
business regulations, heavy restrictions on financial activities, nationalization of industry and finance,
laws protecting workers, higher taxes (amounting to expropriation of private property), the welfare
state, and so on. However, during this period – known as the Golden Age of Capitalism – they grew
three to four times faster than during the period of classical liberalism (1820–1950) and twice faster
than during the subsequent neo-liberal period (1980–2009). 6
In other words, a lot of ‘time-series’ evidence seems to contradict the results of cross-section
econometrics. However, this apparent contradiction becomes easier to understand if we acknowledge
that the cross-section results themselves are very problematic.
Measuring the quality of institutions

By its very nature, the quality of an institution is very difficult, if not totally impossible, to quantify, in
contrast to many ‘policy’ variables, such as the tariff rate or the rate of inflation. Therefore, institutional
qualities are often measured by some indexes based on qualitative judgments.
These indexes are often constructed by organizations that have biases towards free-market
policies and Anglo-American institutions (e.g., the World Bank, commercial information providers, the
Heritage Foundation, the World Economic Forum). Given their inclinations, they do not try to identify
and measure institutions that may help growth but do not fit into the liberalization narrative – for
example, the welfare state. 7 And insofar as these regulatory institutions that promote growth are
important at least in some countries, leaving them out of the institutional universe leads to a biased
picture of how institutions may or may not promote growth and development.
Moreover, many of these indexes are based on surveys among (especially foreign) businessmen
and experts (e.g., academics or financial analysts), many of whomwere trained in the USA. As a
result, they have biases towards free-market policies and Anglo-American institutions. Given their
biases, they are likely to judge a country’s institution to be more liberalized and give them
higher-quality scores than what they really deserve, if the country in question is doing well
6 Per capita income growth rate was nearly 4% during the Golden Age, compared to just over 1–1.5% before it (1820–1950) (Glyn et al., 1990:
42, Table 2.1). During the neo-liberal age between 1980 and
2009, it has been 1.7% (my own calculation based on World Bank and IMF data). 7 From the liberal point of view, a bigger welfare state reduces
growth by taxing wealth creators and reducing the compulsion of the workers to work hard. However, a bigger welfare state may promote
growth, if it uses unemployment benefits and retraining programmes to increase the willingness and the ability of the workers to change jobs, as
it has been the case in Scandinavia.
economically – for many of them, a country that is doing well must have, by definition, liberalized
institutions.
Even disregarding these political biases, the survey results are strongly influenced by the general
state of business, rather than the inherent quality of the institutions whose qualities they purport to
measure (Rodrik, 2009: 188). For example, many people who had thought the institutions in the East
and the Southeast Asian countries were quite good and improving before the 1997 crisis suddenly
started criticizing the institutional deficiencies of these countries after the crisis broke out (Chang,
2000).
Assim, por todas estas razões, os dados são tendenciosos da fonte - um bom (mau) performer é provável a
pontuação mais elevada (menor) na placa de pontuação institucional do que realmente deveria. Quando a
qualidade mede-se são, portanto, estruturalmente tendenciosa, precisamos ter cuidado em aceitar os resultados
dos estudos econométricos, utilizando essas medidas.
A medição da qualidade institucional torna-se ainda mais difícil quando os objetos de medição são
compósitos conceituais, constituídos de instituições concretas diferentes. Exemplos incluem 'instituições'
(por exemplo, GLAESER et al., 2004), 'governança' (por exemplo, Kaufmann et al., 1999, 2002, 2003,
2005, 2006, 2007, 2008,
2009) ou 'o sistema de direitos de propriedade' (por exemplo, Acemoglu et al., 2001). Para começar, é
questionável se podemos somar todos os tipos de diferentes instituições em um conceito composto e medir a
sua qualidade. O desafio é ainda maior para conceitos como 'instituições' e 'governança', mas mesmo 'sistema
de direitos de propriedade', que é um conceito menos abrangente, é composto por um incrivelmente ampla
gama de instituições de componentes - Lei de Terras, Direito do Urbanismo, lei de zoneamento, direito tributário,
direito sucessório, direito contratual, direito das sociedades, lei de falências, as leis de propriedade intelectual, e
os costumes em matéria de propriedade comum, para citar apenas os mais importantes. Será que realmente faz
sentido teórico para adicionar-los?
Além disso, na prática, esses índices normalmente misturam variáveis incompatíveis - eles misturam
variáveis que captam as diferenças na formas de instituições (como a democracia, judiciário
independente, ausência de propriedade estatal) ea
funções que eles executam (como Estado de Direito, o respeito pela propriedade privada, eficácia do
governo, aplicabilidade dos contratos, a manutenção da estabilidade dos preços, a restrição sobre a
corrupção). No entanto desejável que seja para ter uma medida abrangente de qualidade institucional, não
faz sentido para misturar-se as variáveis de formulário e as variáveis de função. 8 Como resultado, as
variáveis que medem a qualidade institucional global são ainda menos confiáveis do que aquelas que medem
a
8 Em resposta a esta confusão, alguns argumentaram que as variáveis de função devem, por conseguinte, ser preferidos sobre as variáveis de
formulário (Aron, 2000). No entanto, não podemos ignorar totalmente as formas. Se fizéssemos isso, seremos semelhantes a um nutricionista que fala
sobre comer uma 'dieta saudável e equilibrada', sem dizer às pessoas como muito do que eles deveriam ter.
486 HA JOON CHANG
qualidade das instituições mais concretas, como a democracia ou a independência de um banco central.
Problema da heterogeneidade da amostra
The econometric studies that support the dominant discourse on the relationship between institutions
and economic development assume, without much critical reflection, that the same relationship holds
across countries. Insofar as the problem is recognized, dummy variables, especially ‘regional’ dummy
variables (e.g., African dummy) are used to partly deal with it, but this is essentially an atheoretical
approach. However, if the relationship differs across countries, it means, in statistical terms, that the
‘homogeneity condition’ is violated. This makes the parameters unstable and thereby the results
sensitive to the sample.
I have already talked about the example of IPR institutions, whose relationship with economic
growth differs across rich and poor countries. For another example, an independent central bank may
be good for countries that specialize in finance, as it would ensure that the interests of finance are put
before those of other sectors in the economy (e.g., maintenance of a strong currency, tough attitude
towards inflation, and, in case it also has regulatory power, a more lenient approach to financial
regulation). In contrast, an independent central bank may not be good for other countries, especially
the developing ones that need aggressive investments and therefore a more relaxed approach to
inflation, on the one hand, and a tougher financial regulation, given that their thin financial markets
may be more easily manipulated, on the other hand.
Of course, violation of the homogeneity condition is a common problem with all cross-section
studies, and not just the ones looking at the relationship between institutions and growth, but the
problem may be more acute in the case of the latter studies. The relationship, as pointed out above, is
much more complex and more poorly understood than other economic relationships, so the likelihood
of heterogeneity in the sample is even greater in this case.
4. Back to theories – theories of institutional change
When institutional deficiency was identified as the key explanation – or at least one of the key
explanations – for the puzzle of ‘good’ (liberalization) policies failing to work, the supporters of such
policies could actually have taken two courses of action.
One course of action, which was not taken, would have been to recognize that their policies work
well in economies that have liberalized institutions (which itself is a doubtful proposition, but let us
give it the benefit of doubt for the moment) but not in economies without those institutions. Then they
could have given up implementing their preferred universal policies and proceeded to prescribe to
each country only policies that had been designed with its institutional characteristics in mind. This
course of action, unfortunately, was not taken.
The course of action taken was to change the institutions, rather than the policies, in line with the
so-called GSIs. So, for example, it was argued that deregulation has failed to work in many countries not
because it was a wrong policy but because private property rights were weakly protected in those
countries, thereby failing to assure potential investors that they will reap the full gains from their
investments. In such a case, it was argued, the right thing to do would be to strengthen the protection
of property rights, rather than backtrack on deregulation. Likewise, from this perspective, privatization
could be seen to have failed to deliver the expected results not because private ownership does not
work in the particular cases in question but because the privatized corporations were not well
governed due to poor legal institutions, especially the weak protection of shareholder rights. Once
again, the right response would be to improve the corporate governance institutions and then push
further with privatization, rather than reversing or stopping privatization.
Opportunity costs of institutions

Whatever the theoretical merits of the GSI approach to institutional reform may be, it needs one
critical assumption about the real world, if it is to work. It is the assumption that institutions can be
changed easily. However good the GSIs that the dominant discourse recommends may be, it would
be a pie in the sky, if remoulding non-GSIs into GSIs, or importing GSIs into countries with missing
institutions (e.g., some countries did not have patent laws before the TRIPS agreement) is very
difficult. Moreover, even if it did not cost much by some absolute standard, changing institutions so
that some given policies can become more effective may be a bad strategy, if adopting different
policies is even less costly (of course, assuming that the benefits of two strategies are the same).
To illustrate this point, let me use one of my earlier examples. Suppose that you have identified
the reasonwhy privatization has not workedwell in a country to be the poverty of its corporate
governance institutions. As someone convinced of the superiority of private property, you may want
the country to stick to privatization, but as a scarcity-conscious economist who always cares about
opportunity costs (at least according to Lionel Robbins’ definition of economics as ‘a science which
studies human behavior as a relationship between ends and scarce means which have alternative
uses’), you would recommend that course of action only if the net present value of the costs of
changing the corporate governance institutions (the costs of change itself – see below on that – plus
the negative future effects, if any) are outweighed by the net present value of its benefits (the
increased efficiency and growth due to better-governed privatized former SOEs).
Mas quantas pessoas realmente fazer essa análise fi t custo-benefício antes de recomendar a reforma
do sistema de governança corporativa - ou para que o assunto antes de recomendar qualquer mudança
institucional? Muito poucos, contando a partir de
488 HA JOON CHANG
o entusiasmo com que eles foram empurrando para a reforma institucional nos países em
desenvolvimento.
O ponto que estou tentando fazer aqui é que há custos envolvidos na criação e na direcção de
novas instituições. Por exemplo, um país pode copiar a lei de patentes e outras leis de direitos de
propriedade intelectual dos EUA e declarar que tem agora boas instituições de DPI, mas essas leis
não vai implementar-se automaticamente. Eles precisam de agências que podem implementá-las -
uma patente de fi ce que podem avaliar e pedidos de patentes de processo, os advogados de
patentes que podem lidar com as disputas, tribunais de patentes para resolver as disputas, os
inspectores que pode pegar os infratores de direitos autorais, e assim por diante. Todos estes
necessitam de recursos humanos e financeiros. Quando financeira e de recursos humanos são
reafectados a partir de usos existentes, a fim de executar as novas instituições, bem-estar social vai
sofrer se esses recursos utilizados para se dedicar a coisas mais necessárias. Por exemplo,
Assim, mesmo para uma instituição que estamos certos vai trazer um monte de benefício, temos que
considerar os custos necessários para a sua criação e funcionamento futuro, antes de recomendá-lo.
Infelizmente, muitos economistas ignorar a questão dos custos de oportunidade da reforma institucional,
quando se trata de implementar aquelas instituições que eles gostam.
Duas visões tradicionais sobre mudanças institucionais - voluntarismo contra o fatalismo
Neste ponto, deve-se notar que nem todos os interlocutores do discurso dominante sobre instituições e
desenvolvimento acho que as instituições são fáceis de mudar. Na verdade, alguns deles pensam que as
mudanças institucionais são quase impossível. Eles pensam que as instituições são determinadas pelas
coisas imutáveis, como clima e cultura, então eles não podem ser alterados, exceto por alguns choques
externos que marcaram época, como colonização.
So, for example, temperate climate in the USA is supposed to have made smallscale land
ownership the natural institution of land ownership, which then led to greater demands for democracy
and education by smallholders, which then made the USA awealthy country by restraining the scope
of arbitrary government expropriation. In contrast, the tropical climate inmany Latin American
countries is supposed to have led to latifundia-dominated agriculture, producing the opposite results
(Engerman and Sokoloff, 1997).
Para outro exemplo, os europeus trouxeram com eles as instituições ruins, destinados
principalmente a extração de recursos, quando eles colonizaram países tropicais, porque não quer se
contentar nesses países devido a doenças tropicais, enquanto eles trouxeram melhores instituições
em colônias de colonos na temperado zona porque queriam viver lá si. Estas instituições,
argumenta-se, tem
em seguida, determinou o quão bem a propriedade privada é protegida em um país, determinando

assim o seu desempenho de crescimento até hoje (Acemoglu et al., 2001). For yet another example,
Botswana’s historically inherited consensus-oriented political culture, with strong grass-roots
influence, is supposed to have made its post-colonial leaders to create an inclusive property rights
system, which has allowed the country to avoid the likely ‘resource curse’ (it has a lot of diamonds)
and achieve successful economic development (Acemoglu et al., 2003). The upshot of this view is
that a country’s fate is already ‘written’. Institutions are relevant – no, they are more than relevant,
they are arguably the most important – in explaining which country does better than others, but they
are not really something that we can change – they are products of immutable things such as climate
and culture, affected only by epochal external shocks like colonization.
So, curiously, the dominant discourse on institutions and development seems to prefer ‘corner
solutions’ when it comes to institutional changes. On the one hand, we have the extreme voluntarism
of the GSI school, which believes that institutions can be changed very easily if there is a political will.
On the other hand, we have the extreme fatalism of the climate-culture school, which believes that
institutional patterns are deeply influenced by immutable (or at least nearimmutable) factors, such as
climate and culture, and therefore that there is nothing much we can do about it.
Against the voluntarism of the GSI school

Even though we may not want to (and we should not, as I will argue later) go as far as accepting that
a country cannot get out of its historical groove which it has fallen into thanks to some long-standing
‘tradition’ or some epoch-making events, the extreme voluntarism of the GSI literature is unwarranted.
There are many reasons why institutions cannot be changed at will.
Now, in the rationalist discourse of GSI, all rational government leaders should adopt GSIs, as
they are proven to be the best institutions – that is, unless they are motivated by self-interests and
want to preserve socially inefficient institutions that benefit them personally. The benefits could be of
material kinds – for example, concentrated land ownership, as in many developing countries today –
or ideational – for example, the Gold Standard in the 1920s or Marxist ideology in the Soviet Union
before its fall (on the role of ideas in institutional changes, see Blyth, 2003).
However, it is not always, or even necessarily predominantly, because those who have (financial,
political and ideological) power want to preserve those institutions that serve their interests that
institutional changes are difficult to bring about.
First, the rational-choice framework of the GSI discourse may make us think that institutions are
products of rational (and selfish) choices of individuals, but human beings are products of existing
institutions, which are in turn a mixture
490 HA- JOON CHANG
of deliberate choices made by agents of yesteryears and the institutions that had existed prior to
those agents and at least partially formed them (this is what Chang and Evans, 2005, call the
‘constitutive’ role of institutions). Given this, the very notions of self-interests and rationality are
defined by history. What they want and how they think they can best achieve it depend on who the
people in question are. Thus seen, in refusing to introduce a GSI, a country may not be being
‘irrational’ or driven by the ‘rational’ choice of selfish rulers, as mainstream institutional economists are
likely to think. It may be following its own notion of rationality, efficiency and justice. In this sense, the
path-dependence in the process of institutional evolution operates at a more fundamental level than
we normally think.
Second, insofar as some institutions have been deliberately designed and codified, they often
contain rules that make changes difficult. Institutions are
meant to be stable – otherwise they will have no use. So, if you are designing a new institution, you
will make it sure that it cannot be changed too easily. And the degree to which you will make an
institution difficult to change will be greater, the more important the institution is considered to be. So,
typically the constitution will be far more difficult to change than lesser laws. In other words,
institutions often have in-built mechanisms against change.
Third, some other times, potentially beneficial institutional changes are not made because only
simultaneous changes in complementary institutions can bring about enough benefits (Aoki, 2007).
For example, land reform will work well only when the changes in land ownership are accompanied by
the introduction of institutions that can supply affordable inputs (e.g., credit, infrastructure, fertilizer) to
the newly created smallholders, such as cooperatives, public irrigation corporations, public rural
banks – as seen in the cases of East Asia and the US examples (Chang, 2009). Unless (at least
enough of) its supporting institutions are correctly identified and installed at the same time, introducing
a new institution may not bring about the desired outcomes.
So, it not just because of the ‘stupidity’ and the self-interest of those who lead developing
countries, which have supposedly inferior institutions, that institutional reforms do not happen easily. It
is also because of the constitutive role of institutions, the inherent change-resistance of designed
institutions, and the interdependence between institutions. Given that the GSI discourse’s
understanding of institutional change is so fundamentally at odds with the very things that we know to
characterize the process of institutional changes, we need to be very wary of its extreme voluntarism.
Against the fatalism of the climate-culture school 9

Now, criticizing the GSI school for its extreme voluntarism is quite easy, if not totally painless.
However, that does not mean that we should go to the other
9 This section draws from Chang (2007b).
extreme and agree with those who think that institutional changes are basically impossible and
therefore that the institutional arrangements which a country has inherited determine the course of its
history – unless we have really huge, epochmaking external shocks such as colonization. History is in
fact full of examples of big institutional changes made through deliberate human actions, not totally
determined by the existing institutional structures.
How is this possible? Did I not just say that institutions are very difficult to change?
The dominant discourse on institutions in the tradition of the climate-culture school thinks that all
institutions in a country are permeated by one ‘tradition’ – so, for example, the political culture, and
thus the process of institutional evolution, in the USA was driven by the desire of the small men to
protect themselves against the intrusion of the central government, while Botswana’s modern-day
political culture, and thus the country’s institutional evolution in the recent period, was indelibly
marked by its tradition of grass-roots participation and consensus-building.
No entanto, na realidade, complexo institucional de um país contém vários elementos e, portanto,

podem geralmente ser descrito como pró-desenvolvimento, antidevelopmental, ou o que quisermos,
dependendo de quais elementos especial optamos por destacar. Neste sentido, as explicações que se
baseiam na cultura e instituições (como as formas de realizao de valores culturais) pode facilmente
degenerar Publicação antiga justi fi cações. Deixe-me ilustrar meus pontos com alguns exemplos.
First, take the case of Confucianism. Today, many people argue that it is a culture that is
inherently pro-developmental. Indeed, if we highlighted its emphasis on education, its notion of
‘heavenly mandate’ (which gives some important voice to the grassroots and justifies dynastic
changes), its emphasis on frugality, and so on, you cannot have a better culture for economic
development. However, if we emphasized its hierarchical nature (which is supposed to stifle creativity;
see Krugman, 1994), its penchant for bureaucracy, its detestation for craftsmen and merchants
(engineers and businessmen in modern terms), we cannot have a worse culture for economic
development. Indeed, until the 1950s, many people, including the East Asians themselves, argued
that the East Asian countries were not developing because of Confucianism.
Agora, contrastar isso com o Islã, que hoje é considerada a cultura final anti-desenvolvimentista.
De fato, se focado apenas em sua ênfase na vida após a morte, a repressão das mulheres (embora
deve-se notar que mais de 60% dos estudantes universitários no Irã são mulheres e que mais de
metade da equipe profissional no banco central da Malásia são mulheres), e sua série militarista (tal
como consagrado na noção de jihad), vamos acabar com uma imagem que não parece muito
promissor para o desenvolvimento econômico. No entanto, poderíamos isolar sua falta de hierarquia
social, o seu respeito para o comércio (o próprio Profeta era um comerciante), a sua cultura
contratual, sua forte tradição legal (países muçulmanos tinha treinado juízes séculos antes de os
países cristãos), e sua ênfase na
492 HA JOON CHANG
aprendizagem (o mundo muçulmano era o centro do mundo da ciência e da matemática em todo o século
10), e torná-Islam olhar ainda thanConfucianism mais pró-desenvolvimento (ver Chang, 2007a: capítulo
9, no entanto, para uma discussão sobre os aspectos anti-desenvolvimento de o sistema legal
muçulmano, como o direito sucessório, ver Kuran, 2004). Claro, nós não usamos essa caracterização do
Islã, não porque essas características não estão lá, mas porque os países mostMuslim não têm sido
muito bem sucedida no desenvolvimento econômico.
Para outro exemplo, a França é geralmente visto como um país de dirigista cultura e as instituições,
pelo menos desde os dias de Jean-Baptiste Colbert, ministro de finanças de Luís XIV. Contudo, da apatia também
foi uma forte tradição francesa. Entre a queda de Napoleão e a Segunda Guerra Mundial, o país foi ainda
mais liberalizado em sua política econômica do que a então muito liberalizado Grã-Bretanha, em alguns
aspectos (Kuisel, 1981; Chang, 2002a: Capítulo 2). A corrente francesa 'tradição' de dirigismo foi revivida
na década de 1950 depois de um século e meio de coma.
The point is that, even when we accept that a country’s institutions (and culture that underlies
them) are given, deliberate choices still matter because there are always elements in a country’s
cultural/institutional complex that are pulling in different directions. Depending on howpeople interpret
their ‘tradition’, which aspects of it they choose to highlight, and which interpretation wins in political
and ideological battles, a country could evolve into very different directions.
More importantly, over the long term, ‘traditions’ are not immutable. Cultures and institutions
themselves change, often dramatically.
For example, as pointed out above, the Muslim culture was more tolerant, scientifically minded,
and pro-commerce than the Christian ones until at least the sixteenth century. The intolerant,
other-worldly streak became prominent only recently, with the general economic decline of the Muslim
world. As also pointed out above, the Confucian societies, including China itself more recently, have
transformed what once was an anti-developmental culture and engineered the biggest economic
miracles in human history during the last half a century.
One reason for such cultural and institutional shifts is that, as I pointed out above, economic
development brings about cultural/institutional changes, as much as the latter changes bring about
economic development. For example, industrialization makes people more ‘rational’ and ‘disciplined’.
This is testified to by the fact that before their countries achieved a high degree of industrialization,
the Germans and the Japanese were described by visitors from economically more advanced
countries as lazy, irrational, and even congenitally incapable of dealing with machinery – completely
different from their modernday racial stereotypes (for further details, see Chang, 2007a: chapter 9).
For example, in 1903, the American missionary Sidney Gulick observed that many Japanese ‘give
an impression . . . of being lazy and utterly indifferent to the passage of time’ (Gulick, 1903: 117). Gulick
was no casual observer. He lived in Japan for 25 years (1888–1913), fully mastered the Japanese
language,
and taught in Japanese universities. After his return to the USA, he became a champion of racial
equality for Asian-Americans. Nevertheless, even he saw ample confirmation of the then Japanese
cultural stereotype of an ‘easy-going’ and ‘emotional’ people who possess qualities such as ‘lightness
of heart, freedom from all anxiety for the future, living chiefly for the present’ (ibid.: 82).
Before their economic take-off in the mid-19th century, the Germans were typically described by
the British as ‘a dull and heavy people’ (Hodgskin, 1820: 50). Mary Shelley, the author of Frankenstein,
wrote in exasperation after a particularly frustrating altercation with her German coach-driver: ‘the
Germans never hurry’ (Shelly, 1843: 276). It was not just the British. A French manufacturer who
employed German workers complained that they ‘work as and when they please’ (Landes, 1998:
281). Talking about excessive German emotion, Sir Arthur Brooke Faulkner, a physician serving in
the British army, observed that ‘some will laugh all sorrows away and others will always indulge in
melancholy’ (Faulkner, 1833: 155). Given that Sir Arthur was an Irishman, this would have been like a
Finn describing the Jamaicans a gloomy lot, according to today’s cultural stereotypes!
Another, and possibly more important, reason for cultural/institutional shift is that, to paraphrase
Marx, it is humans that change institutions, albeit not in the institutional context of their own choosing.
In the dominant institutional discourse, this is impossible because there is no real human agency.
Material interests that motivate people to change institutions (e.g., pressure for democracy from small
independent farmers) are predetermined by ‘objective’ economic (or even natural) conditions, which
will be obvious to all rational agents (that is, everyone), and therefore there is no real ‘choice’ in what
we do (Chang and Evans, 2005). Or alternatively we are just carriers of cultural ‘memes’ – such as
Botswanan ‘democratic’ political culture or the Confucian ‘work ethic’.
However, in reality, people make choices that are not totally determined by their ‘objective’
economic interests. Ideas, and institutions that embody them, influence how people perceive their
interests (and therefore there is no such thing as ‘objective’ interest in the final analysis) and
sometimes even make people defy their own ‘objective’ interests because of the ideas that they have
internalized. 10
We will be able to break away from the cultural/institutional determinism so prevalent among
mainstream institutional discourse (unless they indulge
10 One interesting example is the case of a Korean planning agency, the Economic Planning Board (EPB). Although it was the centre of
government intervention until the 1970s, for various reasons many bureaucrats at the EPB adopted neo-liberal ideology since the 1980s. By the
early 1990s, some EPB bureaucrats were even calling for the abolition of their own ministry. This flies directly in the face of the fundamental
assumption of self-seeking in orthodox economics. Unless we accept the importance of human agency and the influence of ideologies on it, we
will never be able to understand why these bureaucrats went against their ‘objective’ interests and campaigned for the reduction of their own
power and influence. For further details, see Chang and Evans (2005).
494 HA JOON CHANG
-se em otimismo sem limites do discurso GSI) somente se reconhecer a complexidade da natureza e
da evolução da cultura e instituições, por um lado, e aceitar a importância da ação humana na
mudança institucional, por outro lado.
5. Conclusão
I have critically examined the recent mainstream discourse on the role of institutions in economic
development. I critically examined the theories that the dominant discourse uses in explaining the
relationship between institutions and economic development and discussed their limitations. Not only
do the theories ignore the influence of economic development on institutional changes, but they are
also biased (towards ‘liberalized’ solutions), simplistic, linear, and pays insufficient attention to the fact
that the relationship may differ across time and space.
The evidence provided by the dominant discourse in support of its proposition that ‘liberalized’
institutions that provide maximum business freedom and strongest protection of private property rights
are the best for economic development also turns out to be very partial, conceptually fraught, and full
of practical measurement problems. The evidence largely comes from cross-section econometric
studies, with little attention paid to time-series (in the broad sense) data. The inherent problems with
defining and measuring institutional quality, especially of the composite kinds (e.g., governance,
property rights system), are ignored and the limitations of cross-section regressions for highly
heterogeneous samples are not taken seriously.
O discurso atualmente dominante sobre instituições e desenvolvimento também tem uma muito
má compreensão de como as próprias instituições mudar. Apesar de sua ênfase habitual sobre os
custos de recursos e de oportunidade escassos, os economistas institucionais tradicionais ignorar
quase completamente a questão dos custos de estabelecimento e manutenção de instituições,
tornando assim as suas propostas de reformas institucionais parecer mais atraente do que o que eles
realmente são. Além disso, em termos metodológicos, eles são ou irremediavelmente otimista sobre
as perspectivas de mudança institucional (o discurso GSI) ou excessivamente fatalista (a escola
clima-cultura). Defendo que essas 'soluções de canto' são os resultados de pontos de vista muito
simplista sobre o que são as instituições e como eles mudam.
Eu gostaria de concluir este artigo com um apelo. É que os economistas institucionais precisam
prestar mais atenção ao mundo real, tanto do presente e histórico - e não a releitura de conto de
fadas da história do mundo que tem vindo a caracterizar a economia institucional dominante hoje (a
partir da Revolução Gloriosa de Botsuana cultura política), mas o capitalismo como ele realmente foi.
Muitas vezes, as teorias económicas institucionais, incluindo muitos não-neoclássica
tipos, foram desenvolvidos com base na compreensão em vez estilizada da realidade. No entanto, como
eu tentei mostrar neste artigo, a realidade é muitas vezes mais estranha que a ficção e, portanto, nossas
teorias precisam ser mais ricamente informadas pelas experiências do mundo real - tanto eventos
modernos história e. Só nesta base que vamos ser capazes de desenvolver teorias que são sutil o
suficiente para deixar-nos chegar a conclusões políticas que vão além do voluntarismo selvagem da
escola discurso GSIS eo determinismo simplória da escola clima-cultura. Instituições tornaram-se
politicamente importante demais para ser deixada para aqueles que acreditam nesses argumentos
simplistas e extremistas.
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Jornal de Economia Institucional (2011), 7: 4, 473-498

©C A Fundação JOIE 2010 doi: 10,1017 / S1744137410000378 Primeiro publicado on-line 15

Instituições e desenvolvimento econômico: teoria, política

2. Os problemas teóricos com o discurso dominante sobre instituições e desenvolvimento

O discurso atualmente dominante sobre instituições e desenvolvimento sofre de duas categorias de

Não melhores instituições levar a um desenvolvimento econômico mais eficaz?

A visão atualmente dominante é que as instituições são os determinantes fundamentais da performance

Are liberalized institutions better for economic development?

Do institutions that provide greater economic freedom lead to faster growth?

Is a stronger protection of private property rights better for growth?

Cross-section versus time-series

Measuring the quality of institutions

Problema da heterogeneidade da amostra

4. Back to theories – theories of institutional change

Opportunity costs of institutions

Duas visões tradicionais sobre mudanças institucionais - voluntarismo contra o fatalismo

em seguida, determinou o quão bem a propriedade privada é protegida em um país, determinando

Against the voluntarism of the GSI school

Against the fatalism of the climate-culture school 9

9 This section draws from Chang (2007b).

No entanto, na realidade, complexo institucional de um país contém vários elementos e, portanto,

Acemoglu, D., S. Johnson, e JA Robinson (2001), 'The Origins of Comparative Colonial

Economia Institucional, 3 ( 1): 1-31.

Chang, H.-J. (2008), 'Reforma empresa estatal', no UNDESA (United Nations

Cimoli, M., G. Dosi, e J. Stiglitz (eds.) (2009), Política Industrial e Desenvolvimento:

Engerman, S. e K. Sokoloff (1997), 'factor de Endowments, instituições e Diferencial

10ª ed, New York: Addison Wesley Longman.

Origens Jurídicos, Journal of Economic Literature, 46 ( 2): 285-332.

A. (ed.) (1992), Sistemas Nacionais de Inovação, Londres: Publishers Pinter.

Açao, Cambridge: Cambridge University Press.

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