institutional stickiness and the new development economics.pdf

Institutional Stickiness and the New Development Economics By PETER J. B OETTKE, CHRISTOPHER J. C OYNE, and PETER T. LEESON* ABSTRACT. Research examining the importance of path dependence and culture for institutions and development tells us that “history matters,” but not how history matters. To provide this missing “how,” we provide a framework for understanding institutional “stickiness” based on the regression theorem. The regression theorem maintains that the stickiness, and therefore likely success, of any proposed institutional change is a function of that institution’s status in relation- ship to indigenous agents in the previous time period. This framework for analyzing institutional stickiness creates the core of what we call the New Development Economics. Historical cases of postwar recon- struction and transition efforts provide evidence for our claim. Teeth-gritting humility, patience, curiosity and independent thinking are called for in learning how superior foreign technology works and how it can be improved. Without these conditions the technical assistance “does not take.” The cut flowers wither and die because they have no roots. Paul Streeten (1995: 11–12) I Introduction FIRST INTRODUCED BY NORTH (1990), the notion of institutional “path dependence” has received increasing attention among those interested in the connection between institutions and economic growth (see, for *Peter J. Boettke is at the Department of Economics, George Mason University. Christopher J. Coyne is at the Department of Economics, West Virginia University. Peter T. Leeson is at the Department of Economics, George Mason University. We thank the Editor and an anonymous referee for help