Author contact info: Douglass North Department of Economics Washington University One Brookings Drive; CB 1208 St. Louis, MO 63130 Tel: NA E-Mail: batt@artsci.wustl.edu John J. Wallis Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3552 Fax: 301/405-3542 E-Mail: wallis@econ.umd.edu Barry Weingast Hoover Institution & Department of Political Science Stanford University Stanford, CA 94305 E-Mail: Weingast@stanford.edu Neither economics nor political science can explain the process of modern social development. The fact that developed societies always have developed economies and developed polities suggests that the connection between economics and politics must be a fundamental part of the development process. This paper develops an integrated theory of economics and politics. We show how, beginning 10,000 years ago, limited access social orders developed that were able to control violence, provide order, and allow greater production through specialization and exchange. Limited access orders provide order by using the political system to limit economic entry to create rents, and then using the rents to stabilize the political system and limit violence. We call this type of political economy arrangement a natural state. It appears to be the natural way that human societies are organized, even in most of the contemporary world. In contrast, a handful of developed societies have developed open access social orders. In these societies, open access and entry into economic and political organizations sustains economic and political competition. Social order is sustained by competition rather than rent-creation. The key to understanding modern social development is understanding the transition from limited to open access social orders, which only a handful of countries have managed since WWII.
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