Culture, institutions, and modern growth

Introduction In his Understanding the Process of Economic Change, North for the first time came to grips with the economic significance for economics of cultural beliefs and ideology. He repeatedly referred to them as “scaffolding” for institutions. He pointed out that human beings try to “render their environment intelligible” and erect scaffolds, platforms that allow us to stand on and do things together. Scaffolds are thus constructions that “define the formal structure of incentives and dis-incentives that are a first approximation to the choice set. But they also are the informal structure of norms, conventions, and codes of conduct…and the way the institutional structure acts upon and reacts to other factors that affect…changes in the stock of knowledge.” In what follows, I propose to do three things. First, I will unpack these definitions and come up with a meaningful and useable definition of some Northean terms that could bear a bit of clarification. Second, I will propose to take a look at culture through the perspective of cultural evolution and suggest ways in which we can understand how and why culture changes. Third, I make an attempt to apply ideas from this framework to provide an understanding of a special case of considerable interest to students of economic change, namely the British economy on the eve of the Industrial Revolution.