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Understanding Economic Institutions and Growth Study Guide

This guide explores the core concepts of extractive and inclusive institutions, crucial for understanding political economy and development. It details the characteristics of each, the significant challenges in transitioning from extractive to inclusive systems, and the factors that perpetuate extractive practices. Key areas covered include the concentration of power, economic and social barriers to change, the risk of new forms of extraction, and the concept of critical junctures that can facil

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Exam II: Prosperity, Growth and Sustained Development

Prosperity, Growth and Sustained Development Exam

An exam covering reading assignments regarding prosperity, growth and sustained development.

Political and Economic Institutions

Inclusive vs. Extractive Institutions

Explores the fundamental differences between inclusive institutions, which distribute power and economic opportunity broadly, and extractive institutions, designed to concentrate wealth and power in the hands of a small elite. It covers the mechanics of resistance to change, the risks of new extraction, and the conditions for breaking the cycle of extraction.

  • Inclusive vs. extractive institutions
  • Political and economic institutions
  • The virtuous circle
  • The vicious circle
  • Institutional change
  • Critical junctures
  • Path dependency
  • Political pluralism
  • Rule of law
  • Protection of property rights
  • Economic incentives
  • Innovation
  • Creative destruction
  • Positive feedback
  • Concentration of political power
  • Role of elites and special interests
  • Grassroots movements
  • Institutional transformation

Presentation 2 Submission Details

Presentation 2 Upload Deadline

Presentation 2 upload due November 2, 2026, at 4:00 PM CST for 100 points.

Exam III: Quality of Political and Economic Institutions

Quality of Political and Economic Institutions

Exam covering reading assignments regarding the quality of the political and economic institutions.

Syllabus Quiz Requirements

Syllabus Quiz Information

Syllabus Quiz due August 31, 2026, worth 25 points.

Changing Economic Trajectory and Rethinking Political Economy

Changing Economic Trajectory by Changing Institutions

Rethinking political economy through changing institutions and economic trajectories.

The Lay of the Land

Patterns of Global Prosperity and Inequality

This text explains world inequality and the patterns of economic growth and prosperity across different nations.

  • world inequality
  • economic growth
  • Industrial Revolution
  • gross domestic product
  • geography hypothesis

Extractive Institutions and Political Instability

Extractive Institutions and State Failure in Colombia

The text examines how extractive economic and political institutions, paramilitary control, and lack of centralized state authority contribute to state failure and civil war in Colombia.

  • extractive economic and political institutions
  • state failure
  • civil war
  • paramilitary groups
  • centralized state institutions
  • inclusive institutions
  • civil liberties
  • expropriation of property
  • political power

Political Institutions and Economic Decline

The text examines how political institutions and economic policies contributed to instability in Colombia and Argentina.

  • inclusive economic and political institutions
  • extractive elements
  • insecure property rights
  • state centralization
  • economic crisis
  • international debt
  • exchange rate policy
  • devaluation
  • expropriation of savings

Extractive Institutions and Argentine Political History

The text examines how extractive institutions and concentrated political power shaped economic growth and political instability in Argentina.

  • inclusive and extractive institutions
  • creative destruction
  • political instability
  • pluralism
  • property rights
  • extractive regimes
  • economic growth

Institutions, Economic Development, and Global Inequality

Institutions, Economic Development, and Global Inequality

Explains persistent differences in prosperity between countries by examining political and economic institutions that determine power distribution, incentives, investment, education, and innovation.

  • Political institutions
  • Economic institutions
  • Geography hypothesis
  • Culture hypothesis
  • Ignorance hypothesis
  • Incentives
  • Productivity and growth
  • Power distribution

Inclusive and Extractive Institutions and Growth

The text analyzes how inclusive and extractive political and economic institutions influence long-term growth, institutional change, and the mechanisms of virtuous and vicious circles.

  • Inclusive economic institutions
  • Extractive economic institutions
  • Inclusive political institutions
  • Extractive political institutions
  • Institutional change
  • Critical juncture
  • Path dependence
  • Political pluralism
  • State capacity
  • Rule of law
  • Property rights
  • Economic incentives
  • Creative destruction
  • Virtuous circle
  • Iron law of oligarchy
  • Institutional capture
  • Clientelism
  • Grassroots movements

Institutions and Drivers of Economic Development

Inclusive and Extractive Political and Economic Institutions

Defines institutions as the rules that organize decisions and social interactions, categorized into inclusive and extractive political and economic types, highlighting their impact on society.

  • Inclusive economic institutions
  • Extractive economic institutions
  • Inclusive political institutions
  • Extractive political institutions
  • Property rights
  • Enforcement of contracts
  • Impartial justice
  • Pluralism
  • State centralization

Economic Incentives, Innovation, and Creative Destruction

Economic incentives, innovation, and creative destruction influence decisions, technologies, and the displacement of old activities by new ones.

  • Economic incentives
  • Innovation
  • Creative destruction
  • Competition
  • Education

Role of Institutions in Economic Growth

Inclusive institutions encourage long-term economic growth through mechanisms such as predictable returns on investment, innovation, and productivity, whereas extractive institutions may generate temporary growth by mobilizing resources toward higher-productivity activities.

  • inclusive institutions
  • extractive institutions
  • economic growth
  • innovation
  • productivity
  • resource reallocation
  • economic inclusion
  • protection of rights
  • enforcement of contracts

Historical Examples of Institutional Development

Historical examples highlight how rights, incentives, education, and opportunities influence development through different institutions.

  • Institutional development
  • Economic growth
  • Inclusion
  • Extractive institutions
  • Economic concentration
  • Property rights
  • Monopolies
  • Privatization
  • Coercion
  • Political influence

Hypotheses of Global Inequality

This topic examines geography, culture, and ignorance hypotheses regarding differences in development and modern inequality.

  • Geography hypothesis
  • Culture hypothesis
  • Ignorance hypothesis
  • Global inequality
  • Economic development
  • Protestant ethic
  • Market failures
  • Political incentives

Elites and Special Interests in Economic Development

Elites and special interests can impose privileges that restrict rights and opportunities through institutional capture, rents, and clientelism.

  • Elites
  • Special interests
  • Rents and privileges
  • Institutional capture
  • Clientelism

Limitations of Traditional Economic Development Explanations

Traditional explanations based on investment, education, technology, and productivity fail to explain why some societies generate these elements while others do not.

  • Proximate factors of growth
  • Institutional approach
  • Investment incentives
  • Correlation versus causation
  • Political conflicts and income distribution

Evaluating Geography and Culture Hypotheses

Critique of the Geography Hypothesis

The text examines why the geography hypothesis fails to explain world inequality and the reversal of fortune in various civilizations.

  • geography hypothesis
  • world inequality
  • reversal of fortune
  • agricultural productivity
  • technological dissemination
  • institutional legacy
  • tropical diseases
  • domestication of plant and animal species

Critique of the Culture Hypothesis

The text argues that culture, religion, and national ethics are outcomes of institutions rather than independent causes of world inequality.

  • culture hypothesis
  • institutional differences
  • economic growth
  • world inequality
  • social norms
  • Protestant ethic
  • incentives
  • property rights
  • ignorance hypothesis

Inclusive and Extractive Political and Economic Institutions

The Virtuous Circle and the Black Act

The Black Act and the response of the Blacks illustrate how the Glorious Revolution created the rule of law and a pluralistic nature of interests in Parliament.

  • The Black Act
  • The Glorious Revolution
  • Rule of law
  • Pluralistic nature of interests
  • Whig political party
  • Jacobite revolts
  • Parliamentary constraints on power

Pluralism, Rule of Law, and Virtuous Circles

Describes the emergence of inclusive political and economic institutions through the rule of law, pluralism, and the virtuous circle of gradual reform.

  • rule of law
  • pluralist political institutions
  • virtuous circle
  • inclusive political institutions
  • inclusive economic institutions
  • absolutism
  • gradual reform
  • political pluralism
  • democratization
  • universal suffrage

Virtuous Circles and Inclusive Political Institutions

Inclusive political institutions create a virtuous circle of positive feedback that protects pluralism, the rule of law, and inclusive economic institutions from extractive forces.

  • inclusive political institutions
  • extractive institutions
  • virtuous circle
  • pluralistic political institutions
  • rule of law
  • inclusive economic institutions
  • positive feedback
  • balance of power

Vicious and Virtuous Institutional Circles

Extractive and inclusive institutions create processes of negative and positive feedback that determine the persistence or change of political and economic systems.

  • extractive institutions
  • inclusive institutions
  • virtuous circle
  • negative feedback
  • positive feedback
  • creative destruction
  • pluralism
  • iron law of oligarchy
  • broad coalitions

Political and Economic Institutions

The relationship between inclusive and extractive political and economic institutions determines economic growth and the persistence of prosperity or failure.

  • inclusive political institutions
  • extractive political institutions
  • inclusive economic institutions
  • extractive economic institutions
  • pluralism
  • absolutist political institutions
  • state centralization
  • creative destruction
  • political power distribution
  • economic growth

Mechanisms of Institutional Change and Persistence

Institutional Change, Critical Junctures, and Path Dependency

Explains institutional change as a transformation of rules, critical junctures as historical disruptions, and path dependence as the influence of past decisions on future alternatives.

  • Institutional change
  • Critical juncture
  • Path dependence
  • Transformation of rules
  • Historical disruption
  • Inherited rules

Grassroots Movements and Institutional Transformation

Grassroots movements are forms of social organization that allow people to coordinate demands and influence collective decisions through collective action.

  • Grassroots movements
  • Social organization
  • Collective action
  • Chartist movement
  • Populist and Progressive movements
  • Civil rights movement
  • Institutional transformation

Rule of Law and Property Rights

The rule of law constrains rulers and elites while the protection of property and contracts allows people to retain benefits from work, savings, and investment.

  • Rule of law
  • Property rights
  • Protection of contracts
  • Expropriation
  • Extractive systems
  • Judicial procedures

Concentration of Political Power and Institutional Persistence

Extractive political institutions create a vicious circle where concentrated power and wealth reinforce the capacity of elites to preserve domination.

  • Extractive political institutions
  • Concentrated power
  • Institutional persistence
  • Iron law of oligarchy
  • Negative feedback
  • Structures of domination
  • Checks and balances

Political Pluralism and Distribution of Power

Political pluralism exists when different groups participate effectively in decisions and no group can impose its will without constraints.

  • Political pluralism
  • Formal power and effective power
  • State centralization
  • Political inclusion
  • State capacity
  • Constraints on power

Challenges of Transforming Extractive Institutions

Transformation faces obstacles because those who benefit from extraction usually have the capacity to block changes.

  • Extractive institutions
  • Inclusive institutions
  • Resistance from elites
  • Concentration of money, organization, and coercive means
  • Economic dependence
  • State capacity
  • Informal practices of intimidation and favoritism
  • Political power distribution
  • Critical junctures
  • Constraints on new rulers

Positive Feedback and Inclusive Institutions

Inclusive institutions generate forces through a virtuous circle to preserve and expand themselves.

  • Virtuous circle
  • Inclusive institutions
  • Distributed and constrained power
  • Rule of law
  • Checks and balances
  • Independent media
  • Citizen organization

The Ignorance Hypothesis and World Inequality

Politics and the Ignorance Hypothesis

The ignorance hypothesis suggests poor countries lack economic prosperity due to market failures and uninformed leaders, whereas political incentives and institutional constraints actually drive economic decisions.

  • economics
  • market economy
  • market failure
  • ignorance hypothesis
  • world inequality
  • economic institutions
  • political constraints
  • incentives
  • economic growth
  • politics

Extractive Institutions and Their Socioeconomic Impacts

Extractive Institutions and Zimbabwe's Economic Collapse

  • extractive institutions
  • economic and social consequences
  • dual economy
  • apartheid state
  • one-party state
  • political monopoly
  • land expropriations
  • insecurity of property rights
  • hyperinflation

Extractive Institutions and State Failure in Africa

Examines how extractive political and economic institutions concentrate power and wealth, leading to economic stagnation, civil war, and state failure.

  • extractive political institutions
  • extractive economic institutions
  • state failure
  • iron law of oligarchy
  • economic incentives
  • civil war
  • political centralization
  • economic stagnation

Extractive Institutions and the Vicious Circle

Extractive political institutions lead to extractive economic institutions that enrich a few at the expense of many, creating a vicious circle in Sierra Leone.

  • extractive institutions
  • inclusive institutions
  • indirect rule
  • paramount chiefs
  • marketing boards
  • political power consolidation
  • economic growth
  • property rights
  • social stratification
  • monopoly
  • state authority

The Iron Law of Oligarchy

  • iron law of oligarchy
  • extractive institutions
  • authoritarian behavior
  • patronage networks
  • socialist state
  • nationalizing property

Impact of Inclusive and Extractive Institutions

Trust Busting and Inclusive Institutions

The development of inclusive institutions in the United States through the regulation of monopoly trusts and the influence of political movements.

  • inclusive institutions
  • virtuous circle
  • monopoly
  • Populist movement
  • Progressive movement
  • Interstate Commerce Act
  • Sherman Antitrust Act
  • muckrakers
  • federal regulation of industry

Inclusive Institutions and the New Deal

Inclusive political institutions allow a free media to flourish and resist attempts to undermine their own continuation, as seen through Roosevelt's New Deal and the Judiciary Reorganization Bill.

  • inclusive political institutions
  • extractive political institutions
  • free media
  • New Deal
  • National Industrial Recovery Act
  • Social Security Act
  • National Labor Relations Act
  • Supreme Court
  • Judiciary Reorganization Bill
  • electoral mandate
  • constitutional power

Extractive Institutions and Economic Failure

Extractive political and economic institutions allow elites to enrich themselves and perpetuate power at the expense of the majority of people in society.

  • extractive institutions
  • extractive political institutions
  • extractive economic institutions
  • inclusive institutions
  • iron law of oligarchy
  • crony capitalism
  • communism
  • private property
  • black markets
  • forced labor
  • privatization
  • monopolies

Economic Institutions and National Prosperity

The text examines how inclusive economic institutions foster prosperity while extractive institutions lead to poverty and failure.

  • inclusive economic institutions
  • extractive economic institutions
  • national prosperity
  • poverty
  • economic failure

Economics of the 38th Parallel

The different ways of organizing economies in North and South Korea after 1945 led to divergent economic fortunes and living standards.

  • centrally planned economy
  • market economy
  • private property
  • Juche system
  • economic institutions
  • incentives
  • industrialization
  • agricultural productivity
  • command economy

Extractive vs Inclusive Political and Economic Institutions

Extractive political and economic institutions lead to stagnation and poverty, while inclusive institutions foster economic growth and prosperity.

  • extractive economic institutions
  • extractive political institutions
  • inclusive economic institutions
  • inclusive political institutions
  • political centralization
  • political absolutism
  • creative destruction
  • economic growth
  • property rights
  • pluralistic institutions

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