Friday, March 6, 2009

Institutions and Prosperity

This post relates to the following Keystone Economic Principles:

4. Economic systems influence choices.

5. Incentives produce “predictable” responses.
8. Quantity and quality of available resources impact living standards.

For those of you interested in international economic development, William Easterly at NYU has an interesting post on the Aid Watch blog. It reviews some research that relates economic institutions and economic growth. Essentially, the cited research seems to show a connection between prosperity and respect for the individual (an informal institution).

Easterly admits to some oversimplifying, but the relationship is interesting. At the very least, it would seem to offer an interesting point of discussion for an economics class or courses that discuss philosophical or ethical systems. The research cited at the end of the blog can be found here and here, although they are probably too lengthy and advanced for most students. However, you may find them interesting. I hope to get to them during spring break.

What do you think of Easterly's post? I look forward to your comments.

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