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Institutions, Institutional Change, and Economic Performance. By Douglass C. North. New York: Cambridge University Press, 1990. 159 pp. Cloth, $65.00. ISBN: 0-521-39416-3.
"History matters." The opening words of Douglass C. North's stimulating work, Institutions, Institutional Change and Economic Performance, written in 1990, proclaim the central message of his book from the start. By emphasizing the significance of institutions and institutional change in the development and performance of economies, North challenged neoclassical economics and laid the foundation for a comprehensive neoinstitutional literature. His views were based on the conviction that economic relationships have to be understood within the institutional framework in which they take place. Moreover, he developed at the same time an analytical framework of importance for all social scientists, including historians.
His initial brief pronouncement warmed the heart of this business historian, whose colleagues in business studies generally draw upon a limited historical perspective in conducting their research. In my case, reading the book gave me a new outlook, not only on business history but on history in general.
In North's conceptual framework, the present and the future are connected by the continuity of institutions. Through this notion, North introduces a strong historical dimension to economics and the social sciences, but he integrates historicity through his adoption of the concept of path dependence. And it is exactly this concept, with its wideranging perspectives, that influenced my approach to business history.
To a historian, it is almost self-evident that "history matters," and undoubtedly most historians would agree that institutions matter in historical development. However, when it comes to path dependence, there is less of a consensus. The notion that historical development can follow a specific "path," and that it can even be subject to some sort of "dependence," contradicts the beliefs of most historians regarding the essential character of history, which, they hold, is all about the complexity, uniqueness, and unpredictability of any given situation and its development. They might not even be familiar with the concept of path dependence-the idea that small, early changes, deliberate or not, can have great implications at much later stages, and that certain courses of development, once established, are almost impossible to reverse (most Danish historians, for example, are not acquainted with the concept). There are, of course, both...