Posted by Andy Pike, 3 June 2013<\/p>\n
Growing recognition of the role of institutions in academic and policy circles has invigorated discussion about what they are, how they work and what they might bring and detract from effective local and regional development. Simplistic arguments that institutions are necessarily bureaucratic hindrances to the free and fair operation of the market economy have been questioned. Similarly, the case for institutions as a kind of \u2018magic dust\u2019 capable delivering successful economic development in any circumstances has been challenged.<\/p>\n
\u00a0In defining institutions, many studies fall back upon Douglas North\u2019s idea of institutions as the \u2018rules of the game\u2019 within a society that shape how actors \u2013 public, private and civic \u2013 relate and behave. Making this a bit more concrete, we can identify two main types of institutions \u2013 formal and informal (Figure 1). Formal institutions are \u2018hard\u2019 or codified, typically written down and documented. They include things like charters, constitutions, laws, regulations, rules and requirements. They are manifest in contracts, legal statutes and property rights. Informal institutions are \u2018soft\u2019 or tacit, often existing in the minds and practices of the actors involved rather than being formalised and codified. They include things like conventions, habits, norms, routines, traditions and values. We see them manifest in phenomenon like trust, social capital and networks.<\/p>\n
Figure 1: Types of institutions<\/strong><\/p>\n Formal<\/strong><\/p>\n \u2018Hard\u2019 \u2013 Codified<\/p>\n <\/p>\n Charters, Constitutions, Laws, Regulations, Rules, Requirements<\/p>\n <\/p>\n e.g. Contracts, Legal statutes, Property rights<\/p>\n <\/td>\n Informal<\/strong><\/p>\n \u2018Soft\u2019 \u2013 Tacit<\/p>\n <\/p>\n Conventions, Habits, Norms, Routines, Traditions, Values<\/p>\n <\/p>\n e.g. Trust, Social capital, Social networks<\/p>\n <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Defining institutions and distinguishing their different kinds only brings us so far. Integral to the debate has been the question of their role and contribution to development regionally and locally. As countries across the world wrestle with the challenges of economic development, particularly in the wake of the global financial crisis and in some countries state austerity, questions of institutional design, purpose and contribution have come to the fore.<\/p>\n In theory, institutions can play a positive role in providing public goods, addressing \u2018market failures\u2019, reducing uncertainty, reducing transactions costs, promoting efficiency and tailoring policy to regional and local contexts. These potential roles are manifest in a range of things institutions actually do on the ground:<\/p>\n But the role of institutions is not always and everywhere positive. There are a number of potentially negative contributions institutions make that can inhibit local and regional development. These include: unfunded mandates when they are given or accept responsibility without<\/em> resources; bureaucracy, lock-in and sclerosis hampering flexibility and responsiveness; duplication and fragmentation stimulating competition for resources; capture by elite actors and rent-seeking by particular interest groups; and, corruption. Indeed, recent work by the OECD on Promoting Growth in All Regions<\/a><\/em>\u00a0identified a number of \u2018institutional bottlenecks\u2019 that can trap regions and localities in low growth trajectories:<\/p>\n Central to shaping institutions for local and regional development, then, is a sharper understanding of what they can and can\u2019t do as well as moulding their features to work effectively within particular regional and local contexts.<\/p>\n","protected":false},"excerpt":{"rendered":" Posted by Andy Pike, 3 June 2013 Growing recognition of the role of institutions in academic and policy circles has invigorated discussion about what they are, how they work and what they might bring and detract from effective local and … Continue reading \n\n
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