Institutions, Property Rights, and Economic Development in Historical Perspective

Institutions, and more speci cally private property rights, have come to be seen as a major determinant of long-run economic development. We evaluate the case for property rights as an explanatory factor of the Industrial Revolution and derive some lessons for the analysis of developing countries today. We pay particular attention to the role of property rights in the accumulation of physical capital and the production of new ideas. The evidence that we review from the economic history literature does not support the institutional thesis.

The Emperor Has New Clothes: Empirical Tests of Mainstream Theories of Economic Growth

Modern macroeconomic theory utilises optimal control techniques to model the maximisation of individual well-being using a lifetime utility function. Agents face choices over current and future consumption (with resultant implied savings decisions) seeking to maximise the present value of current plus future well-being. However, such inter-temporal welfare-maximising assumptions remain empirically untested. In the work presented here we test whether welfare was in (historical) fact maximised in the US between 1870-2000 and find empirical support for the optimising basis of growth theory, but only once a comprehensive view of what constitutes a country’s wealth or capital is taken into account.