DOGS AND TAILS IN THE ECONOMIC DEVELOPMENT STORY

Introduction.   In his inspiring Presidential address last year in St. Louis, R. H. Coase noted the important consequences institutions have in determining levels of transaction costs.  A similar message is delivered by Furubotn and Richter in their new book Institutions and Economic Theory (1997).  This they begin by stating the central message of the New Institutional Economics: Institutions matter for economic performance.  The emphasis in both messages is on the important consequences that can emanate from the institutional arrangements on which a society rests.   There is no doubt that institutions do have important consequences, but this is not the only reason for our interest in them.   They also are of interest as phenomena whose existence and nature require explanation, whatever might be their consequences for transaction cost and economic performance.  Of course, most members of the ISNIE recognize these two aspects of our interest in institutions.  My intent today is to convince you that non-institutions also matter, and that they matter particularly to explanations of the existence and nature of institutional arrangements.