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August 31, 2005
MPS Iceland 5: Evolution and degeneration of liberal institutions
Professor Thrainn Eggertsson made a very interesting speech on Icelandic society from the point of view of the new institutional economics school. The new institutional economics is an attempt to incorporate a theory of institutions into economics. However in contrast to the many earlier attempts to overturn or replace neo-classical theory, the new institutional economics builds on, modifies, and extends neo-classical theory. It retains and builds on the fundamental assumption of scarcity and competition. What it abandons is the instrumental rationality that makes history void of institutional decisions. I am very much looking forward to further developments in this method of research.
I was unfortunately unable to attend judge Douglas Ginsburg's speech, but made it back just in time to listen to Andrei Illarionov- Russian president Putin's chief economic advisor.
I do admire Mr. Illarionov for bringing up so frankly many of the problems of today's Russia. He spoke about "the Venezuelan disease" of Russia, where rising oil revenues for the government has encouraged rent-seeking and the increasing control from the central authorities encouraging demgogic and patriotism mongering petro-state. The population of Russia is starting to adapt to a loss of economic opportunities and Russia's dependency on oil will rise.
I do not think this is the fault of oil. In this respect I would like to recommend José Luis Cordeiro's excellent book "The Great Taboo- a true nationalization of the Venezuelan petroleum" (Cedice. Caracas 1998) in which he makes a comparision between three state dependent on oil: Texas, Iraq and Venezuela. Two slid into tyranny and economic despair, one did not and the answer is to be found in the institutions and which ideas that governed them. Oil worsened problems that were already present by making the slid down less obvious.
Posted by Waldemar at August 31, 2005 10:55 PM