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Physician Reimbursement Mechanisms as Social Constraints: An Historical Critique of Douglass North's Theory of Institutional Evolution

Published online by Cambridge University Press:  17 May 2016

Philip C. Williams
Philip C. Williams*
Affiliation:
University of North Carolina, USA
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Abstract

Douglass North, in his seminal work Institutions, Institutional Change, and Economic Performance, defined institutions as “the humanly devised constraints that shape human interaction,” existing within a hierarchical continuum ranging—in order of increasing formality—from taboos, customs, and traditions to more formal constraints such as individual contracts, specific bylaws, common laws, statutes, and constitutions. According to North, institutions evolve as piecemeal economic reactions to the high transaction costs attending greater social complexity. This article tests North's theory against an evolving system of humanly devised constraints: society's mechanism for reimbursing physicians. After examining eight reimbursement systems that range from primitive to complicated—(1) Zinacantan, Mexico, (2) Confucian China, (3) ancient Rome, (4) colonial America and seventeenth-century Britain, (5) the “guild free choice” model, (6) private third-party insurance, (7) government insurance, and (8) HMOs and managed care—I conclude that a “top-downward” model provides a better explanation of physician reimbursement constraints than does North's “bottom-upward” model.

Type
Institutional Evolution
Information
Politics and the Life Sciences , Volume 16 , Issue 2 , September 1997 , pp. 289 - 298
Copyright
Copyright © Association for Politics and the Life Sciences 

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