Wednesday, March 6, 2013

Institutions make the big difference




"Economic institutions are those that really shape the economic incentives. They create opportunities or incentives for investment and innovation. They are crucially related to how level the playing field is. You now have many societies in which only a small fraction of the population are given the opportunity to get into the action. They are the only ones who can work in the modern sector. They're the only ones that can open businesses or open factories or get into trade or get into whatever occupations that they want. So that's really important to have this level playing field, in addition to economic institutions such as property rights and contracting institutions that give incentives to people to take advantage of whatever calling they have in life."

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