Introduction

As a result of the inability of mainstream economics to tackle prominent problems of the global economy, some of its basic assumptions are increasingly being questioned. In this context, the standard emphasis on methodological individualism is gradually being eased in favour of studying the institutional structures necessary for economic development: The social, cultural and political norms and habits economists had come to take for granted. This ‘institutionalist’ approach is most often traced back to the work of Thorstein Veblen in the late nineteenth and early twentieth century. My chapter shows how an acute awareness of the importance of institutions, and more specifically of a certain kind of institutions, in fact has been explicitly present in the history of economic thought and policy at least since the Renaissance. Therefore, in addition to the ‘new’ institutional economics of Douglass North (1991) and the ‘old’ institutional economics of Veblen and Commons, there existed an ‘ancient’ tradition of institutional economics which, among other things, informed the policies responsible for the European economic miracle in the early modern period.

In light of this ‘ancient’ institutionalism, I wish to explore its relevance for economic development. Whereas today's literature tends to discuss institutions independent of the type of productive structure they support, both the ‘ancient’ and the ‘old’ institutional schools saw institutions as an integral part of a particular production system. Different technological systems, or modes of production, were seen as requiring different institutions, and an institution per se could not change the technological system. Whereas institutions like property rights and universal suffrage today often are seen as promoting economic development, I wish to show that the arrows of causality historically have been considered going in both directions. In fact, the institution of insurance came about after the need for it developed out of risky long-distance trade, and modern democracies, in any meaningful sense, were the fruits of literate urban artisan and working classes rather than of feudalism.

It is therefore not entirely clear that the Masaai are poor and stuck in subsistence agriculture because they lack property rights. Perhaps, I would argue, they lack property rights because they are poor and stuck in subsistence agriculture.