Economic History of Europe
September 14, 2010
Mr. Douglas North proposes his new framework which is the new institutional economics which it entails the institution property rights, transaction cost, economic organization in history and the economic development of countries. In the chapters 4, 5 and 6 Mr. North explains about his framework and he breaks them down in details. Mr. North uses many examples to describe different sections of his framework starting with “Analyzing Economic Organization in History,’ Mr. North starts off by saying that “One must be able to measure the quantity of a good in order for it to be exclusive property and to have ...view middle of the document...
In a country like Japan cost of living very high so it is expensive to live there and it is considered one of the worlds most expensive place to live. Japan is the second economy behind the U.S. because they do a lot of retails, telecommunication, banking, stock exchange and transportation so you can see how Japan fits in the high standard of cost of living.
Mr. North talked about “Price-making market and the Great Transformation. “In the price-making market Mr. North said that Polanyi made a basic error in thinking that any deviation from the Agora-type market implied non-economizing behavior even the era of the great transformation.” (North, 1981) Price-making is like a cost pricing function where you sell your product or service at a given price that does not maximize profits
Next is the “Ideology and the free rider problem.” Mr. North talks about the free rider issues of how it effects large groups and the decline of people who votes. The free rider propblem is usually found in investment companies which handles large enormous investments, where some investments are not accounted for such as capital and consumption good investment.” (North, 1981) The free rider problem in my perspective people who recieve more than the public. Free rider to me is like a defense spending where in some existence of providing public goods. In some ideologies like Anarcho capitalism often overturn the system of property from any state regulation.
The ideology Mr. North state that “Ideology can develop without the guidance intellectuals, but they do so only exceptionally.” (North, 1981) He also said that “ideology is justifying an existing structure of property rights and terms of exchange or attacking the injustice of the current structure, it...