“You can’t do with the state, but you can’t do without it.”

So Douglass North sums up his conclusion from a Nobel-winning career researching the role of institutions in economic growth – in [amazon_link id=”0262025620″ target=”_blank” ]Lives of the Laureates [/amazon_link](4th edition, 2004) edited by William Breit and Barry Hirsch. He rejects the pure public choice approach, which sees the state as “a leviathan to be contained, … little more than a giant theft machine.” Equally, North’s own work revealed many historical examples of states, and state ideologies, which were productively inefficient (and worse) over long periods of time.

As North ruefully points out, the question is at least as old as [amazon_link id=”0192805924″ target=”_blank” ]The Federalist Papers[/amazon_link]. He ends his essay here by saying the institutional approach he pursued over his career needs to be joined with new discoveries from cognitive science about why people form the beliefs they hold. I’m sure that will prove fruitful – we are in one of those periods when economics will do a lot of useful absorbing of knowledge from the biological sciences, from ecological modelling to psychology and neuroscience. But, reading the Acemoglu and Robinson book, [amazon_link id=”1846684293″ target=”_blank” ]Why Nations Fail[/amazon_link], institutional economics itself is at an exciting stage.

[amazon_image id=”0262025620″ link=”true” target=”_blank” size=”medium” ]Lives of the Laureates: Eighteen Nobel Economists[/amazon_image]

[amazon_image id=”0451528816″ link=”true” target=”_blank” size=”medium” ]The Federalist Papers (Signet Classics)[/amazon_image]