by Hillary Mara

Extensive examination on the relationship between institutions and their importance for development demonstrates that one can only very cautiously find a positive relationship between these two variables.

 

Endogeneity

Przeworski’s article, “Institutions Matter?” describes how the endogenous nature of institutions means that they merely reflect the context that allowed them to develop, making it difficult to judge how (and if) they matter, for it is the context itself that is important. The fact that many countries have seemingly-correct institutions that do not function validates this explanation—institution make look the same in different places, but in reality they function quite differently (Pritchett). If the institution itself mattered, they would be easily replicable and reproducible regardless of the context, but because it is rather values, norms, conditions, and culture that drive institutional functionality, it is common to see this disjointedness. As Pritchett notes, the “appearance of functionality hides dysfunction.” This demonstrates that the presence institutions does not have such a simple relationship to development—though, the functionality of institutions may be correlated.

 

Form vs. Function

In a similar argument, Dellepiane-Avellaneda claims that we must “distinguish between the rules and the play of the game.” An institution that looks good may not act as it should. This author cites Douglass North’s notion that “the set of incentives in a society (the ‘institutional matrix’) is composed not only of formal rules, but also of informal constraints and enforcement characteristics.” This point reinforces the idea that while institutions may be structured so as to facilitate development, formal rules may not be sufficient to achieve this. With this argument Dellepiane-Avellaneda echoes Przeworski’s notion of the endogenous nature of institutions.

I agree with these assertions above. Reflecting on countries with the farce of democracy, holding “free and open” democratic elections that are actually rigged, is one obvious example of how governments can go through the motions of good governance without actually subscribing to its ideas. In other examples it may be incompetence, corruption, lack of material or financial resources, or other factors that do not allow these perfectly good structures to function as they are designed or intended.

The importance of these arguments is explained by Pritchett. For development actors, or governments themselves, too much focus on the proper form cannot ensure proper function. Pritchett notes the futile methods of development actors who encourage “best practices” and “blueprints,” attempting to transfer the design of a solid institution from one place to another. This approach fails, because outside of the context that allowed this institution to thrive, there is no way to predict how the institutions functions will be manifest.

 

Implications for Development

For these reasons, we cannot claim that institutions have a positive relationship with development. To the contrary, these arguments reveal that certain attitudes and values may be what actually gives rise to a functioning government on a path towards development. This is what Dellepiane-Avellaneda argues, stating that “any attempt to examine how institutions contribute to the process of economic development should rest upon a better understanding of the forces shaping the evolution of such institutions.” Nonetheless, we must recognize that these “values” are even more difficult to classify and quantify than institutions, and institutions will likely continue to be a stand-in by which to measure development.

 

Works Cited:

Dellepiane-Avellaneda, Sebastian. “Good Governance, Institutions and Economic Development: Beyond the Conventional Wisdom.”  British Journal of Political Science, Vol. 40, No. 1 (2010), pp. 195-224.

Pritchett, Lant, Michael Woolcock, and Matt Andrews. “Looking like a state: techniques of persistent failure in state capability for implementation.” The Journal of Development Studies 49.1 (2013): 1-18.

Przeworski, Adam “Institutions Matter?” Government and OppositionVol. 39 (2004), No. 4, pp. 

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