Rules, institutions, and North's institutionalism: state and market in early modern England

Abstract

Douglass North's influential institutional analysis argues that political institutions affect economic institutions, which influence economic growth. His definition of institutions assumes that rules function as constraints, and leads to an interpretation of capital market growth after the Glorious Revolution as resulting from new political constraints on the Crown. This definition is too restrictive, however. It fails to acknowledge the generative function of rules, and so overlooks other connections between political and economic institutions. I revisit the case of early modern England to show how new political rules generated new forms of economic action that accelerated capital market growth.