Book Review: Thrainn Eggertsson. 2005. Imperfect Institutions: Possibilities and Limits of Reform. The University of Michigan Press, Ann Arbor, MI. vi + 272 pp. Cloth: $65.00; Paper: $27.95.

Journal of Bioeconomics (2006) 8:8590 Springer 2006DOI 10.1007/s10818-006-7405-7

Thrainn Eggertsson. 2005. Imperfect Institutions: Possibilities and Limits of Reform.

The University of Michigan Press, Ann Arbor, MI. vi + 272 pp. Cloth: $65.00;

Paper: $27.95.In what sense can institutions that emerge and survive be imperfect? What are the

possibilities and limits for reforming imperfect institutions? These are among the

many issues Thrainn Eggertsson addresses in Imperfect Institutions: Possibilities &

Limits of Reform.This book updates and extends the insights of two earlier Eggertsson books on

human institutions, Economic Behavior and Institutions (1990) and Empirical Studies in Institutional Change (1996), the latter with Lee Alston and Douglass North.

Imperfect Institutions will appeal primarily to those interested in the role of institutions in the relative growth of nation-states, the possibilities nation-states have

to escape their histories, and the prospect they have for eluding poverty traps. The

book is almost evenly split between theory and policy with many applications plus

an extensive case study of Eggertssons home country, Iceland.Economists and other social scientists have taken many different approaches

to institutional analysis. See Sugden (1989), Dugger (1990), Eggertsson (1990),

North (1990), DiMaggio & Powell (1991), Knight (1992), Greif (1993), Landa

(1994), Calvert (1995), Weingast (1996), DiMaggio (1998), Hall & Taylor (1998),

Ensminger (1998), Hodgson (1998), Nee & Brinton (1998), Williamson (2000), and

Mantzavinos (2001). Some scholars of institutional thought assume or imply that

institutions are perfectly adapted to their purpose; otherwise they would not have

emerged and, even if they had, could not have survived long in competition with

known superior institutions. Other scholars of institutional thought focus on the

permanence or only gradual change of imperfect or dysfunctional institutions.The idea that imperfect institutions are partly responsible for differential national

growth has a long history, dating back at least to Adam Smiths (1776) classical

approach. While rarely acknowledged as a founding source of comparative institutional analysis, Smiths Wealth of Nations described, among other things, the

imperfect institutions of mercantilism. Smith emphasized how different institutions factor mobility and product mobility could result in greater nationalBook Review86 ROBERT M. YARBROUGHwealth. He posited that unfettered market institutions would produce a ner division of labor or specialization of task, which through international trade could

generate greater national wealth.History has demonstrated the general validity of Smiths...