Why Some Countries Are Rich and Some Are Poor

Professor North describes the difficulties encountered in promoting development: although economists are well aware of the conditions that promote productivity and creativity, only formal rules can be easily changed. Formal rules are but one part of a set of institutions in which people operate: informal norms of behavior and the enforcement mechanisms for both formal and informal rules have profound effects on human thought and activity. Economists have traditionally endeavored to impose simplistic sets of formal rules on developing countries; this model is largely ineffective because it ignores the role of culture and beliefs in shaping behavior. The difficult but effective alternative requires study of a society's culture to understand ways in which the formal rules may be changed—consistent with the culture and belief system—to encourage productive and creative activity.