Ten Nobels for the future

Douglass C. North was born in Cambridge, Massachusetts, in 1920. He had been accepted for Harvard but his family moved to San Francisco and he therefore went to the University of California at Berkeley, where he became a convinced Marxist. His record as an undergraduate "was mediocre to say the best". After he graduated he joined the Merchant Marine, and at the end of the war he might have chosen to become a photographer, after working in the summer of 1941 with Dorothea Lange. But her husband, Paul Taylor, who was in the Economics Department at the University of California, persuaded him to become an economist.

He got his first job at the University of Washington in Seattle. His early work and publications centered around expanding on the analysis of life insurance and its relationship to investment banking. He next turned to developing an analytical framework to look at regional economic growth.

In 1956-1957 he was invited to spend the year at the National Bureau of Economic Research as a research associate, and did a major quantitative study of the balance of payments of the United States from 1790 to 1860, which led to his first book, The Economic Growth of the United States from 1790 to 1860.

In 1966-1967 he switched from American to European economic history and went to Geneva as a Ford Faculty Fellow, to "re-tool", being convinced that the tools of neo-classical economic theory were not up to the task of explaining the kind of fundamental societal change that had characterized European economies from medieval times onward. The result was Institutional Change and American Economic Growth (with Lance Davis) and The Rise of the Western World: A New Economic History (with Robert Thomas): both books were early tentative attempts to develop some tools of institutional analysis and apply them to economic history.

The long road towards a new analytical framework involved developing a view of institutions and a model of political economy in order to be able to handle and explain the underlying source of institutions. It also involved coming to grips with why people had the ideologies and ideas that determined the choices they made.

In Structure and Change in Economic History (1981) Douglass C. North abandoned the notion that institutions were efficient and attempted to explain why "inefficient" rules would tend to exist and be perpetuated. Still dissatisfied with his understanding of the political process, he left the University of Washington in 1983 after being there for 33 years as Director of the Institute for Economic Research and as Chairman. He moved to Washington University in St. Louis, where he created the Center in Political Economy and where since 1996 he is Olin T. Spencer Professor in Arts and Sciences.

In his 1990 book, Institutions, Institutional Change and Economic Performance, he began to puzzle seriously about the rationality postulate. This took him into cognitive science in order to understand the way in which the mind acquires learning and makes choices, and how individuals make choices under conditions of uncertainty and ambiguity.

Douglass C. North was awarded the Nobel Prize in Economics in 1993. In 1985 he was appointed editor of the Cambridge Series of books and monographs on "The Political Economy of Institutions and Decisions". He was editor of the Journal of Economic History for five years, President of the Economic History Association in 1972 and a twenty-year member of the Board of Directors of the National Bureau of Economic Research. In 1996 he was elected a Fellow of the british Academy.

1997
Beliefs, institutions
and the process
of economic change