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Institutions first

By Peter Boettke and Alexander Fink

Abstract

Chang (2011) raises doubts about the effects of institutions on economic development and questions the positive effects of entirely free markets based on secure private property rights. We respond by stressing that institutions structure the incentives underlying individual action, secure private property rights are indispensable for prosperity, institutions have a first-order effect whereas policies only have a second-order effect, successful institutional change comes from within a society, and given the status quo of developing countries first-world institutions are likely not to be available to them.

Topics: B52 - Institutional; Evolutionary, O10 - General, B53 - Austrian
Year: 2011
DOI identifier: 10.1017/s1744137411000063
OAI identifier: oai:mpra.ub.uni-muenchen.de:32093

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