“Disorder—revolution, lack of personal security, chaos—has characterized a great deal of the human condition,” writes economist Douglass North, who was awarded the Nobel Prize in 1993. North has long tried to distill lessons from economic, social, and political evolution. He casts a wide net with Understanding the Process of Economic Change, yet the book is meaty enough to appeal to an educated readership and offers a window into how his mind works as he analyzes institutional transformations and human attempts to “get things right.”
Part One explores the psychological and even neurological underpinnings of economic transformation. North admits the human mind is devilishly complex, and believes the mind is the missing element in most economic models. Chapters in this section include “Belief Systems, Culture and Cognitive Science” and “Consciousness and Human Intentionality.” As he explains, “The pragmatic concern is with the degree to which our beliefs accord with ‘reality.’ ... [B]ecause throughout human history we have gotten it wrong (misunderstood reality) much more often that we have gotten it right (understood reality), it is important that we be very conscious about the nature of reality.”
Part Two focuses on social history and tracks how, when, and why change has occurred in economies past and present. Analyzing historical events is key in his view. The book includes a broad overview of the history of the Western world since the collapse of the Roman Empire and a chapter devoted to the rise and fall of the Soviet Union. (The former Soviet Union provides lessons on how a society errs by attempting to institutionalize beliefs and control the destiny of its citizens.) Part Two also analyzes the effects of war and other sources of social disorder on economics, buttressed by statistics on human mortality and other factors from the last thousand years.
North makes a compelling case for interpreting the conditions for order and disorder. He is right that such understanding is essential if we are to come to grips with the process of economic change. Such change, he concludes, is ultimately propelled by human efforts to control our own destiny. This book and the logic of its central insight should at least offer inspiration for plenty of debate and further research.