Understanding the Relationship between Institutions and Economic Development: Some Key Theoretical Issues

The paper tries to improve our understanding on the role of institutions in development by critically examining the current orthodox discourse on institutions and highlighting some of its key problems. After discussing some definitional problems, the chapter examines a number of problems in the orthodox literature arising from the widespread failure to distinguish between the forms and the functions of institution. Then it critically examines the excessive emphasis on property rights in the orthodox literature. Finally, it discusses a number of problems that arise from the simplistic view on institutional change that underlies the orthodox view on institutional persistence.