The Political Economy of Post-adjustment: Towards New Theories and Strategies of Development by Hakim Ben Hammouda

Author:Hakim Ben Hammouda [Hammouda, Hakim Ben]
Language: eng
Format: epub
Tags: Political Science, General, Social Science
ISBN: 9781351771610
Google: DloPEAAAQBAJ
Publisher: Routledge
Published: 2017-11-30T04:39:11+00:00

Institutionalism and Transaction Costs

Certain authors focus on Coase and Williamson’s transaction cost approach, which considers that, in the context of an imperfect market, businesses seek to internalise a great many activities in order to save on costs generated by recourse to the outside (Basu, 1984). This theory has not been much developed, because of criticisms mainly of its descriptive character and its lack of an operational definition of the notion of transaction costs.

Institutionalism and Social Change

This theory is an extension of North’s work on economic history. North places institutions at the centre of the evolution of different economies and views them as the foundation for the decadence or the prosperity of nations (North, 1988). According to this conception, development is defined as growth dynamics with effective institutional change.

According to North, relative price changes are the foundation for institutional change, since they lead economic actors to define new contractual and institutional arrangements. North’s theory of institutions includes three levels of analysis:

• a theory of the rights of property and organisation, which, according to North, helps the problems of incentives and information in a market economy;

• a theory of government, which, according to North, plays a central role since it defines and implements property rights;

• a theory of ideology that justifies and explains actors’ behaviour and especially induces them to control their individualistic actions and makes them more sensitive to equilibrium and social stability.

North’s ideas on institutions have led to the development of a considerable body of work in development economics. Ruttan and Hayami (1984), for instance, developed the theory of institutional innovation induced by interactions between supply and demand. Feeny (1979) showed that the rising price of land in Thailand from 1850 onwards and its opening up to international trade led to stronger land property rights and the abandonment of slavery. Other authors, such as Bently and Oberhofer (1981), observed similar developments in West Africa, with increased demand for institutional change following economic development and an increase in productivity under the impact of technical change.

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