I’m well along with Douglas Allen’s new book, Institutional Revolution: Measurement and the Economic Emergence of the Modern World (Markets and Governments in Economic History). A full review will follow in due course but I can’t resist enthusing about it in advance. The book takes a transactions cost perspective on the shift in institutional structures between the early 18th and late 19th centuries, as Britain hurtled through the Industrial Revolution. The key, Allen argues, was the way the technologies helped greatly reduce the uncertainty of life as people gained more and more control over nature. This made it possible to distinguish rather better between bad luck and low effort, previously an impossible measurement task, and therefore to reward merit in administrative jobs rather than having to build institutions that guaranteed loyalty. Thus government by the aristocracy gave way to the growth of the bourgeois professions. Fascinating stuff, with an obvious extension to developing countries today – and perhaps our own economy too as in the frontier intangible activities such as building software or creating hit movies it is also very hard to distinguish talent from luck. Are trust institutions, like the old British aristocracy but different, going to make a comeback?
Institutional Revolution: Measurement and the Economic Emergence of the Modern World (Markets and Governments in Economic History)