Institutional Path Dependency

One of themes of Daron Acemoglu’s and James Robinson’s book, Why Nations Fail, is that there is a certain degree of path dependency in institutional change. This means that current and past institutional frameworks will have a varying degree of influence on the direction that institutional change takes. They apply this concept of path dependency to changes from extractive to inclusive institutions, noting that when extractive governments fall apart the tendency is for the survivors to fight over what remains of the existing state — they tend to fight over control of wealth extraction.

As it turns out, there are number of “natural experiments,” as unfortunate as they are, that show us this concept at work. In a new piece for Foreign Affairs (“Why the Generals Back Morsi“), author Joshua Stacher writes on happenings in Egypt,

In return for the military’s support, the Muslim Brotherhood incorporated many of its core demands — no parliamentary oversight over the military budget, the establishment of a National Defense Council stacked with generals, and the ability to try civilians in military tribunals — directly into the draft constitution. Egypt’s founding document, then, is the realization of what the military has sought ever since Mubarak’s departure. Even better for the military, it got exactly what it wanted while appearing to stay on the sidelines of Egyptian politics.

(For some context, recall the spring revolution in Egypt. Some of the latest events in Egypt are summarized by the New York Times.)

These events remind us that oftentimes true transitions to less extractive, or more inclusive, institutions require previous shifts in the distribution of power. While Why Nations Fail doesn’t necessarily come to this conclusion, it certainly seems that the more widely distributed power is, the more inclusive and flexible the institutions are. In fact, if this is right, it may undermine one of the auxiliary assumptions made by Acemoglu and Robinson in their book: centralized authority is not a prerequisite of inclusive institutions conducive to economic growth.

  • Leonardo IHC

    We can add that the institutional setting, as made then applied by and on people, depends on people culture and ideas, which in turn depend on education and past stories… so there must necessarily be a certain degree of path-dependency