Douglass North's writing on institutional change recognized from the very start that such change depends on cognition and beliefs. Yet, although he focused on individual beliefs, we argue in this paper that such beliefs are social constructs. We suggest that institutions – rules, expectations, and norms – are based on shared cognitive rules. Cognitive rules are social constructs that convey information that distills and summarizes society's beliefs and experience. These rules have to be self-enforcing and self-confirming, but they do not have to be ‘correct’. We describe the characteristics of such rules in the context of a market for ideas, and illustrate their importance in two developments central to the growth of modern economies: the rise of the modern state with its legitimacy based on consent, and the rise of modern science-based technology that was the product of the scientific revolution and the Enlightenment.

In a seminal 1989 article, Douglass North and Barry Weingast argued that by making the monarch more answerable to Parliament, the Glorious Revolution of 1688 helped to secure property rights in England and stimulate the rise of capitalism. Similarly, Daron Acemoglu, Simon Johnson, and James Robinson later wrote that in the English Middle Ages there was a ‘lack of property rights for landowners, merchants and proto-industrialists’ and the ‘strengthening’ of property rights in the late 17th century ‘spurred a process of financial and commercial expansion’. There are several problems with these arguments. Property rights in England were relatively secure from the 13th century. A major developmental problem was not the security of rights but their feudal nature, including widespread ‘entails’ and ‘strict settlements’. 1688 had no obvious direct effect on property rights. Given these criticisms, what changes promoted the rise of capitalism? A more plausible answer is found by addressing the post-1688 Financial and Administrative Revolutions, which were pressured by the enhanced needs of war and Britain's expanding global role. Guided by a more powerful Parliament, this new financial system stimulated reforms to landed property rights, the growth of collateralizable property and saleable debt, and thus enabled the Industrial Revolution.

Unrealized potential of entrepreneurial activities in developing countries has often been attributed to missing formal market-based institutions. In new institutional economics, the concept of ‘voids’ is suggested to describe the absence of market-based institutions. In reality, however, ‘institutional fabrics’ are always and necessarily complex and rich in institutions. No societal sphere is institutionally void. In this article, we contribute to existing literature on entrepreneurship and institutional economics by presenting a framework for studying the richness and complexities of institutional fabrics, as well as ways in which entrepreneurs respond to institutions. Distinguishing four types of institutions relevant for entrepreneurs, we analyze case study data from Ethiopia, and discuss how ‘tensions’ between potentially incompatible institutions result in behavioral frictions. Some entrepreneurs play the complex institutional environment and benefit from the tensions in it, whereas others may drown into the institutional ‘swamp’ they face. Policy makers should acknowledge that institutions not only result from formal policy making and that in many cases a diverse set of institutions is needed to facilitate market exchange and solve constraining tensions. The diversity that results from initiatives of institutional entrepreneurs may create a more effective institutional environment for development.

This paper investigates the claim that colonial history has left an enduring imprint on Africa's institutional and economic development. The literature following Acemoglu, Johnson and Robinson (2001) and Sokoloff and Engerman (2000) maintains that different types of colonialism affected the institutional environment differently, and that path-dependence subsequently ensures that these institutional differences and their impact on economic performance are persistent over time. By tracing the impact of colonial institutions on contemporary institutions over time, I show that – in contrast to claims in this literature – the relevance of colonial legacies to institutional quality and to per capita income is rapidly disappearing in Africa. Differences in institutional quality or income are explained less and less by colonial legacy, while there is some evidence that precolonial social and geographical circumstances are becoming more important. I conclude that while colonialism has affected African institutional and economic development significantly, this impact is not persistent. Rather, the evidence suggests that colonialism has created a large but very temporary institutional shock, after which a long-run equilibrium is being restored.

This contribution aims at an original comparison of development analysis with Elinor Ostrom and Esther Duflo from a methodological standpoint, scrutinising their relationship to theory and their operative research strategies. Both perspectives are investigated as case studies for a broader discussion about significant trends in economics and social sciences. Duflo and the J-PAL's approach illustrates – in its own way – new trends and some blind alleys in contemporary forms of mainstream economics, whereas Ostrom and the Bloomington school point towards the marked theoretical and methodological reflexivity of institutionalism, its sensitivity to historical diversity and openness towards social sciences. Distinct social philosophies and episteme are at stake displaying a great divide between two brands of realism and pragmatism, two relationships to development, expertise and knowledge. The paper also contrasts Duflo's methodological monism and mechanistic piecemeal analysis with Ostrom's methodological pluralism and adaptive complex systems analysis.

Institutional reforms in developing countries often involve copying institutions from developed countries. Such institutional copying is likely to fail, if formal institutions alone are copied without the informal institutions on which they rest in the originating country. This paper investigates the role of human actors in copying informal institutions. At independence, all British African colonies imported the same institution intended to safeguard the political neutrality of their civil services. While the necessary formal provisions were copied into the constitutions of all African colonies, the extent to which they were put into practice varies. The paper investigates the connection between the variation in the legal practice and the presence of British colonial officers after independence. A natural experiment around compensation payments to British officers explains the variation in the number of officers who remained in service after independence. Interviews with retired officers suggest that the extended presence of British personnel promoted the acceptance of imported British institutions among local colleagues.

There is a tight historical connection between endemic labour scarcity and the rise of coercive labour market institutions in former African colonies. This paper explores how European mining companies in the Belgian Congo and Northern Rhodesia secured scarce supplies of African labour, by combining coercive labour recruitment practices with considerable investments in living standards. By reconstructing internationally comparable real wages, we show that copper mine workers lived at barebones subsistence in the 1910s–1920s, but experienced rapid welfare gains from the mid-1920s onwards, to become among the best paid manual labourers in Sub-Saharan Africa from the 1940s onwards. We investigate how labour stabilization programs raised welfare conditions of mining worker families (e.g., medical care, education, housing quality) in the Congo, and why these welfare programs were more hesitantly adopted in Northern Rhodesia. By showing how solutions to labour scarcity varied across space and time, we stress the need for dynamic conceptualizations of colonial institutions, as a counterweight to their oft supposed persistence in the historical economics literature.

Several studies link development to institutions transplanted by European colonizers and here we extend this line of research to Asia. Japan imposed its system of well-defined property rights on some of its Asian colonies. In 1939, Japan began to register private land in its island colonies, an effort that was completed in Palau but interrupted elsewhere by World War II. Within Micronesia, robust economic development followed only in Palau where individual property rights were well defined. We show that well-defined property rights in Korea and Taiwan secured land taxation and enabled farmers to obtain bank loans for irrigation systems. Considering Japanese colonies, we use the presence or absence of a land survey as an instrument to identify the causal impact of new institutions. Our estimates show that property-defining institutions were important for economic development, results that are confirmed when using a similar approach with British Colonies in Asia.

Institutions matter for economic growth. Thus, the leaders who help to develop institutions, and their ideas and beliefs, must play a central role in any narrative that seeks to explain such growth. This leads to the appearance of institutional entrepreneurs, who act in a given cultural and political environment. We focus on the problem of state building, where formal institutions designed by leaders must be consistent with a given society's existing informal institutions. We consider an analytical narrative focusing on the Chilean experience in the 19th century. This serves as an interesting quasi-natural experiment on the role of ideas, leaders, and institutions in the problem of economic growth and development.

Was technological progress during and after the Industrial Revolution top-down or bottom-up? The technology that created the great inventions was driven by a combination of pathbreaking ideas and the dexterity and skills of trained artisans. While those forms of human capital were quite different, they both came out of small elites of intellectuals and craftsmen, what are rapidly becoming known as “upper-tail human capital.” I analyze the institutions that drove the incentives for both, and show that they came together to produce the Great Enrichment. These incentives were both material and social: between 1500 and 1700, the search for financial security and reputation cooperated in producing a unique institutional environment in which the elites in Western Europe produced the three legged-stool of European modernity: the Reformation, the Scientific Revolution, and the Enlightenment. Once these three movements had succeeded, the foundation for modern economic growth had been laid.