Douglass North, winner of the Nobel Memorial Prize in economics, was perhaps the single most influential economist of institutions. His work on economic history, and his ideas about economic development have shaped intellectual argument across the social sciences and had an important influence on public policy. Douglass North died last month. This appreciation of his life and work was written by Margaret Levi, the Sara Miller McCune Director of the Center for Advanced Studies in the Behavioral Sciences at Stanford University, and Barry Weingast, the Ward C. Krebs Professor of Political Science at Stanford University. Both knew Doug as a colleague and dear friend.
Doug would say he was dumb, that he had to mull things over and over again, that it took him a long time to realize what he was up to. In truth, he was a visionary. Often he couldn’t say why he was convinced that a particular idea was relevant to the question we had posed, but three months later it would be obvious.
Doug was at the forefront of four revolutions in economics and political economy.
- The New Economic History (NEH)
- The “property rights” revolution
- The New Institutional Economics
- Cognitive science.
Soon after winning recognition for a new line of thinking, he’d be dissatisfied and begin pondering the limits of what he had begun.
Doug’s first book, “The Economic Growth of the United States, 1790-1860” (1961), helped foster the revolution that came to be known as the “new economic history,” the application of frontier economics and quantitative analysis to the study problems of the past. He and Robert Fogel were awarded the Nobel Prize in economics (1993) largely for their leadership in this new research program. But Doug’s Nobel equally reflected his second and third major contributions.
Doug understood that the neoclassical economics on which the NEH was based was inadequate to address the problems he sought to answer, namely, why are a few countries rich while most remain poor? Much of his best work addressed this question, including his next four books.
In “Institutional Change and American Economic History” (1971), co-authored with Lance Davis, and in “The Rise of the Western World” (1973), co-authored with Robert Thomas, he began his exploration of the role of rights and institutions in political-economics of development. While the first book followed the NEH focus on the United States; the second broke new ground by studying European development.
Arguably his best book, “Structure and Change in Economic History“ (1981), dug deeper into the problem of development, providing the beginning of the Northian approach to understanding institutions. “Institutions, Institutional Change, and Economic Performance“ (1990) represents the culmination of this research and remains the premier statement of the profound role played by institutions in economic, political, and social realms of action. Twenty-five years later, economists and political scientists continue to mine this rich line of inquiry.
Doug’s next intellectual turn went to the heart of human action, focusing on the limits of the assumption of rational choice. In “Understanding the Process of Economic Change“ (2005), Doug drew on recent developments in cognitive and behavioral sciences to expand our understanding of human choice and action.
His last book, coauthored with John Wallis and Barry Weingast, developed a new approach to the problem of development. “Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History“ (2009), highlights the role of violence. Once again North and his colleagues took on a huge swath of history, searching for the sources of and inhibitions to significant secular change. The authors explain that all countries have to solve the problem of violence, but that they do so in different ways. Developing countries reduce violence through rent-creation and limiting access to organizations. This solution inhibits development and the production of economic prosperity; it also implies that the economists’ solution to development – getting prices right and reducing “market-intervention” – fails because it ignores the problem of violence. In contrast, developed countries solve the problem of violence through open access to organizations, competition, and economic integration that raises the costs of violence. Working with Steven Webb, then of the World Bank, Doug and his colleagues produced an edited volume, “In the Shadow of Violence” (2013), applying this approach to a range of developing countries.
Few have succeeded so well in transforming complex issues—“wicked problems” in today’s parlance—into tractable questions on which serious advances could be made.
Nonetheless, Doug’s decision to become an economist was not straightforward. Much of his history is told elsewhere, but the crucial moment came when Dorothea Lange, his fellow photographer in the Farm Security Administration, and her husband, Paul Taylor, Doug’s economics professor, asked him to dinner on his return from World War II. Taylor urged his profession, and Lange, hers. We know who won.
We both have experiences with Doug North illustrating the intellectual curiosity that nourished his insights and genius. Margaret met him in 1974 when she was in her first weeks as an assistant professor at the University of Washington. He sought her out because he understood that she was a Marxist, and he wanted to relearn the Marxism he had studied as a youth. They hit it off and that began a life-long friendship that included Doug’s wife and editor, Elisabeth Case. Doug and Margaret founded an undergraduate political economy program and taught together for nearly 10 years. Simultaneously, Steve Cheung and Yoram Barzel, Doug’s colleagues in economics, were doing cutting edge research following Coase’s analysis. In one sense, Doug became their student, but he also understood how to take this approach far beyond the topics from which it emerged. The result was “Structure and Change.” And, Margaret, transformed by her interactions with Doug, published “Of Rule and Revenue.”
Having made considerable distance in his intellectual journey, Doug was ready for the next frontier. Over lunch one day in Seattle, Doug asked where he could learn the most modern forms of political economy practiced in political science. Margaret recommended Washington University in St. Louis, where a group was revolutionizing our discipline.
Not long after, Doug left the University of Washington and headed to Washington University in St. Louis, where he learned from and influenced Ken Shepsle, Jim Alt, Norman Schofield, Jack Knight, Jean Ensminger, and also, of course, Barry Weingast. Jim and Doug collaborated on a new and path-breaking book series, Cambridge Studies in Political Economy. And Barry and Doug began a collaboration that lasted until the last days of his life.
The engaged conversations that began at Wash U continued at Stanford, where Barry had moved and where Doug spent the academic year, 1987-88 as a fellow in the Center for Advanced Study in the Behavioral Sciences. During this period, North and Weingast completed their first paper, “Constitutions and Commitment: The Evolution of the Institutions of Governing Public Choice in 17th Century England.” This paper proposed a new approach to thinking about the role of constitutions in securing the role of government in promoting long-term economic growth. They used these ideas to analyze the constitutional changes during the Glorious Revolution in 17th century England, a major step in the political-economics of development.
Doug revealed yet again at Stanford his rare knack for listening to the ideas of others. Never a fan of the growing mathematization of economics, Doug admitted that he didn’t like all the game theory being used at Stanford, but since Stanford was known for it, he wanted to learn more. They met with Paul Milgrom to discuss these issues. Paul impressed Doug, not only for his brilliance, but for his attitude about economics and research. In discussing the role of mathematics in economics, Paul said, “first we get the economics right, then we build the models.” This suited Doug’s philosophy, and the three collaborated to produce a paper on the medieval “Law Merchant” (1990). This paper sought to understand the role of law and judges prior to the rise of the nation state with an ability to enforce laws across a larger territory; it also demonstrated how institutions could be emerge endogenously as part of the equilibrium of a game.
Doug’s genius lay in being willing to draw from multiple social sciences research programs to consider big questions. He drew on the best economics while also demanding that the discipline itself change to meet new challenges. He was the rare economist who was a true political economist, recognizing that conflict, government, irrationality needed to be explained.
With the passing of Doug North on November 30, less than a month after his 95th birthday, the world lost one of the great economists of the last century. Doug was known for his intense curiosity and his relentless – and even mischievous – pursuit of new ideas. He was a great friend, colleague, and coauthor, and we’ll miss him terribly.