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Institutions first

Published online by Cambridge University Press:  08 February 2011

PETER BOETTKE*
Affiliation:
Department of Economics, George Mason University, Fairfax, VA, USA
ALEXANDER FINK
Affiliation:
Department of Economics, George Mason University, Fairfax, VA, USA

Abstract:

Ha-Joon Chang, in his article ‘Institutions and Economic Development: Theory, Policy and History’, raises doubts about the effects of institutions on economic development and questions the positive effects of entirely free markets based on secure private property rights. We respond by stressing that institutions structure the incentives underlying individual action, secure private property rights are indispensable for prosperity, institutions have a first-order effect whereas policies only have a second-order effect, successful institutional change comes from within a society, and, given the status quo of developing countries, first-world institutions are likely not to be available to them.

Type
Research Article
Copyright
Copyright © The JOIE Foundation 2011

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