The Problem with Neoclassical Institutional Economics: A Critique with Special Reference to the North-Thomas Model of pre-1500 Europe

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A variety of scholars with widely differing political and disciplinary orientations continue to be fascinated by the prospect of making endogenous variation or changes in institutional structures through the use of a general model. While sympathetic to the appeal of such a research program, I argue in this paper that this methodological objective is, in the following sense, not attainable. At a minimum, some subset of institutional structures or rules needs to be treated as parametric in a general equilibrium model, and granted the same explanatory status traditionally accorded tastes, technologies, and endowments in such models. This proposition is developed through a critical analysis of work representative of this research program: in particular Richard Posner's Economic Analysis of Law (Boston: Little, Brown 1973) and, more especially, Douglass North and Robert Paul Thomas' The Rise of the Western World