since the early 1990 s dramatizes the puzzles: models that seemed, path depend-
ency fashion, to be set on the road to decline, notably in the Anglo-Saxon world,
experienced an unexpected revival, and in at least some instances, the
most notable of which is the UK, may have done so through the unexpected
intervention of decisive historical actors.. That the divide between the ‘‘economic’’ and the ‘‘political’’ in institutional life
is a constructed divide now seems a truism. But the mystery of construction,
how and why it changes, runs through all the substantive areas examined in the
preceding pages. The mystery brings us back to the whiVof mysticism in North:
‘‘We cannot see, feel, touch, or even measure institutions.’’ And we cannot ‘‘see,
feel or touch’’ because at heart an institution is an idea. Understanding eco-
nomic institutions is at heart not about understanding structures, but about
understanding the role of ideas in economic and political life. And as is shown
in Blyth’s ( 2002 ) study of ‘‘economic ideas and institutional change in the
twentieth century,’’ we have barely scratched the surface of that problem.At the root of many of the particular issues examined in the preceding pages lies
a much grander set of issues, too large for the scale of this chapter, but an
important theme of Braithwaite’s accompanying chapter in this volume. They
can be summed up in the familiar language of the principal–agent problem.
Principal–agent problems are endemic in the kinds of societies examined here—
those marked by high levels of organized complexity and by a reWned division of
labor. They are, too, at the heart of problems of accountability under democratic
representativegovernment. Since the pioneering work of Berle and Means ( 1932 /
1968 ) on the separation of ownership and control they have been central to
understanding power and control in the characteristic economic institution of
modern capitalism—the large corporation. The study of institutions, whether
conventionally ‘‘economic’’ or conventionally ‘‘political,’’ reminds us that there is
no escaping these problems: choosing the ‘‘market’’ over the ‘‘state’’ just involves
deciding to live with one set of principal–agent problems rather than another.
References
Albert,M. 1993 .Capitalism against Capitalism. London: Whurr.
Atiyah,P.S. 1979 .The Rise and Fall of Freedom of Contract. Oxford: Clarendon Press.
Ayres, I. and Braithwaite,J. 1992 .Responsive Regulation: Transcending the Deregulation
Debate. Oxford: Oxford University Press.
Berle, A. and Means,G. 1932 / 1968 .The Modern Corporation and Private Property, 4 th edn.
New York: Harcourt Brace.
Blyth,M. 2002 .Great Transformations: Economic Ideas and Institutional Change in the
Twentieth Century. Cambridge: Cambridge University Press.
economic institutions 159