Where Have We Been and Where Are We Going?

Douglass C. North
1997 Social Science Research Network  
I Improving our undertanding of the nature of economic change entails that we draw on the only laboratory that we have--the past. But "understanding" the past entails imposing order on the myriad facts that have survived to explain what has happened--that is theory. The theories we develop to understand where we have been come from the social sciences. Therefore there is a constant give and take between the theories we develop, and their application to explain the past. Do they improve our
more » ... ey improve our understanding--is the resultant explanation broadly consistent with the surviving historical evidence? But can the gradual accretion of "sound" explanations of the past help in understanding where we are going? That depends on the degree to which there are lessons from history. If there are lessons they are not the kind that are the bread and butter of politicians, statesmen and soothsayers. Rather they are of two kinds: 1) the deep underlying interrelationships between the rules of the game that humans devise to structure human interaction and the way those rules evolve in the interaction between humans and their ever changing environment--an environment that is changing not only as a result of external natural forces but also in consequence of the changes induced by the players themselves. Which brings us to 2) the significance of path dependence, properly understood, in shaping the present and the future. * . I am indebted to Elisabeth Case for editing this essay. 2 To begin we need to assess what we have learned from the past and then assess the usefulness of the tools at hand--ie the rationality assumption and growth theory we employ in economics? We will then go on to explore in subsequent sections some recent development that offer the promise of improving our understanding of the past and of where we are going. II The overall pattern of evolution involves 3 stages: (1) The physical and chemical evolution of the stars and planets, (2) biological evolution starting with DNA and development of living species, and (3) societal evolution starting with homo sapiens.(see Boulding, Journal of Evolutionary Economics, Vol I, #1, pp9-17). While stage one is a given in our analysis stage two plays an important role since the evolving genetic structure of humans--particularly the way the mind has evolved and the development of language play a major role in the third stage of societal evolution. The first great discontinuity in societal evolution was surely the development of agriculture which took place almost four million years after human beings became separate from other primates--that is, only ten thousand years ago. It probably evolved independently in different parts of the world at different times and may have resulted from some combination of constriction of the environment and local population pressure (North and Thomas, 1979?).
doi:10.2139/ssrn.1494 fatcat:iwqghbl3s5gpxlqpxulwrdwzb4