Evolution of an Institutionalist/Economist's Research Program

The purpose of this paper is to investigate the evolution of Douglass Cecil North's research program. Our study indicates his plan has been directed by this question: What are the effective factors on the success or the failure of the economies and why the performances of economies are so different? Realizing the strong effect of institutions on economic performance, in 1970s North conducts several studies about institutions, economic growth and change. However, because of his reliance on the tool box of neoclassic economics, he could not explain the inefficiency of institutions which govern the economies worldwide. Therefore he abandons the idea of efficient institutions, substitutes the assumption of bounded rationality for instrumental rationality, follows the concept of path dependence, and presents a model to explain inefficient institutions and weak economic performance. In subsequent decades North tends in a gradual manner to cognitive science, goes beyond the assumption of bounded rationality, and instead of emphasizing on the computational aspect of cognition emphasizes on the connectionist aspect of cognition. North believes it is the ideologies of the individuals that, during years and in a cumulative way, determine the individual choice and the path of the evolution of economic systems. Therefore, without understanding the process of cognition, it is not possible to obtain a correct understanding of economic changes.