Evaluating and Comparing Economies:
A. Need some definitions before we go on...
Institution: Institutions are rules of the society that structure the interaction among people.
Are made up of formal rules and regulations.
And informal rules as well at times.
Changes in working rules can modify institutions or create new ones, with the economy evolving in the process.
Institutions, collectively, are the framework within which all of human interaction...political, social and economic...takes place.
Capitalism => Adam Smith - dominance of "the invisible hand" in guiding economic activity. Limited role of government (provide public goods and define the rules of the game).
[a] Translated to “Washington Consensus” or “Neoliberalismo” in Latin America during the 1980s and 1990s.
Prevailing Norm: The philosophical basis accepted by authorities and the economy's performance determines whether the working rules are retained, modified, or replaced.
[a] Philosophical basis... church + philosophical basis = attitudes => working rules.