Social Science Knowledge and Economic Development: An Institutional Design Perspective

Citation

Vigneswara Ilavarasan, P. (2006), "Social Science Knowledge and Economic Development: An Institutional Design Perspective", On the Horizon, Vol. 14 No. 3, pp. 139-142. https://doi.org/10.1108/10748120610690717

Ruttan's induced institutional design: an essential ingredient for policy making

Often young social science scholars tend to be less confident of the utilitarian value of their research, especially those who are at the academic institutions. Apart from theory building, they are not sure how their empirical findings transform into instruments of policy making. The present book clears up the above diffidence successfully. A precise introduction about the book for a reader, to use the author's words, can be as follows:

It is essential for the social sciences to advance our understanding of the historical processes of social and economic development. But that is not sufficient! If social science knowledge is to be valued by society it must also advance the knowledge to successfully intervene in the process of development – to reduce the cost of the trial and error that accompany the historic organic processes of institutional innovation. My interest in this book is to explore the contributions of the several social sciences to the design of policies, mechanisms, and systems that can become efficient sources of development (p. 29).

Objective of the book is unfolded in four parts. First part describes the major ideas covered in the book and proposes a model of induced innovation. Second part reviews nature of insights contributed by four disciplines anthropology, sociology, political science, and economics to policies of economic development. Keeping the review as basis, third part discusses four selected domains in relation to development: technology, traditional local institutions, religion and culture, and foreign aid. Fourth part summarizes the book in two pages. There are ten chapters divided among four parts. First and fourth parts have one chapter each, and second and third parts consist of four chapters each. The book (341 pages) has an exhaustive bibliography (49 pages), an author index and a subject index.

The first chapter introduces the main objective of the book, how social sciences knowledge can be used in policy formulations related to economic development through a framework called induced institutional innovation. According to this framework economic development can be brought by introducing changes at the institutions level that are interdependent and interrelated to three significant components: resource endowments, technology, and cultural endowments. Earlier researchers tend to focus on unidirectional relationship between two or three selected components. This framework is holistic and includes multidirectional relationship between various components in its analysis. Treatment of the framework is not just at the conceptual level but well grounded in two empirical studies, “land tenure and labor relations in a Philippine village” and “constructed markets for emissions trading” in US. This chapter forms the platform for the discussions raised in rest of the book.

The second chapter looks at the relationship between cultural endowments and economic development. It highlights the importance of role played by cultural factors in the economic development by discussing five major works (Hoselitz, Hagen, Adelman and Morris, Myrdal, and Bauer). It notes that cultural dimension is not well incorporated in the research of the mainstream development economists. The chapter points out few of the cultural dimensions that affect economic development: traditional and modern value systems, personality structure, and national level socio‐cultural dimensions. After an in‐depth analysis of anthropology, that includes inspection of various perspectives (materialistic, interpretative, postmodern, and social constructive), the chapter expresses skepticism over value addition of anthropology to the development economics. It suggests that anthropologists need to embrace the “development project” rather than resist and incorporate “more rigorous methods for incorporating cultural endowments and change in cultural endowments in their research” (p. 63).

The third chapter examines sociology, especially sociology of development and underdevelopment. Major development theoretical debates present in sociology focusing on various dominant ones are evaluated to understand how development economics can gain. Following are considered modernization theory that includes, Parson's structural‐functionalism with evolutionary component, dependency perspective that includes dependency and underdevelopment, Marxist theory of imperialism and World systems perspective, sociology of knowledge that include works of Popper, Merton and Kuhn, and Coleman's rational choice theory. The chapter wonders why sociology has been less aggressive in contributing to policy formulations. Among all sub fields, Coleman's rational choice theory or work on social capital seems to facilitate communication between sociologists and economists. The chapter argues that sociology of knowledge needs to follow “more empirically grounded ethnographic research on social construction of indigenous technology” (p. 98), to offer meaningful insights to the development economics.

The fourth chapter provides an exhaustive analysis of studies that deal with political development, or political science to understand role of political pre‐conditions for the economic development. It starts with a discussion of research by economists (Gerschenkron, de Schweinitz and Bhagwati) who highlighted the role of authoritarian state in the initial stages of building national economy. Based on review of studies, it adds that democracy is relatively secure in developed countries. Chapter contends that there is little understanding one can gain about the relationship between democracy and economic development which further declines when cultural endowments are taken into consideration. It suggests “power” as an alternative analytical tool to enhance the understanding and illuminates with a discussion on definition and measurement. The chapter points out that local institutions need to be designed to meet the broader economic goals, and there should be greater collaboration between political scientists and economists to mutually gain from each other in better policy making.

The fifth chapter attempts to know what development economics can learn from growth economics. It reviews classical and Schumpeterian theories of economic growth to present the role played by various components that are part of the induced institutional design framework. The chapter analyzes modern growth theory into three waves created by works by Harrod, Domar, Solow, Swan, Romar and Lucas: Keynesisn growth theory, Neoclassical growth theory, and Endogenous growth theory. It opines that the growth economics has been inadequate in including social and political dimensions in their analysis. It also suggests some fundamental concepts should be adopted by the growth economics in future: structural transformation, demographic transformation, natural resource constraints, and income distribution. The chapter hints at the rise of new development economics with a brief discussion on few of the emerging concepts: property rights, transaction costs and information theory. Taking the view of development economist, the chapter critiques growth economists for keeping distance with developments in the other subfield thus foregoing meaningful insights.

Chapter six focuses on technology for an in‐depth multidisciplinary analysis. It gives importance to various aspects of technology adoption, diffusion, and transfer under which contributions from various disciplines are discussed. Apart from surveying all important studies, (Rogers is extensively cited), the chapter also reasons why certain disciplines focus on selected aspects of technology. For instance, three reasons are given why economists focus transfer aspect of technology more.

Using a case study, chapter seven highlights the role of social capital, a form of cultural endowment in the process of economic development. A local informal, tradition based association (Groupments Naam or Kombi Naam) organized themselves to construct stone dikes to control water and prevent soil erosion. This local technical innovation was diffused to many parts of the geographical region through similar associations with a help of an international non governmental organization (Oxfam).

Chapter eight evaluates the relationship between religious fundamentalism, nationalism and economic development based on the existing studies. Three religious regions are predominantly taken for discussion: Middle East (Islam), South Asia (Hinduism) and East Asia (Confucianism). The chapter notes that the linkage between religion and economic development is inadequately addressed in general, especially scarcely by the anthropologists. Existing studies that focus on the above linkage are able to explain the role of religion in pre‐contemporary economic development to a certain extent. However, contributions in understanding the present development, they are not very significant. For instance, in China, Confucian ethical guidelines lead to stronger family networks which explain the present social capital dominated corporate behavior of Chinese firms. Also, unimpressive economic development of India before 1990s is attributed to “Hindu Equilibrium” model which constrains individualism and insists on altruistic economic behavior of people. The chapter also points out that though few religion institutions that are directly related to the economic development are not successful in the present period. Banks in Middle East, supposed to follow “no interest” principle guided by Islam, are questioned for the practices that do not confirm. The chapter concludes by pointing out the challenges that would be faced by the social sciences in designing institutional systems that merge local civic needs and globally directed economic development.

The ninth chapter looks at foreign economic assistance from views of both donor and recipient countries. It notes that two dominant reasons of foreign aid, donor interests (economic, political and strategic), and ethical considerations are not adequately supported by the empirical evidence. Review proves that “the aid effort was motivated more by Cold War tensions than concerns about relieving poverty or generation of long‐term growth” (p. 265). Also, existing studies fail to provide enough insights for the institutional design and offers an open challenge of developing “sustainable development assistance programs” (p. 268). Final chapter is brief in nature and concludes the book.

Ideas presented in the book are developed and refined by the author over a period of two decades through multiple empirical studies and refined through various mediums that include referred publications and graduate class seminars. The book offers perspectives of both developed and developing countries in understanding development. After reading the chapter one, which introduces the theoretical framework, induced institutional innovation, scope for treating each chapter as an independent one is open. Each chapter presents a detailed discussion focusing on a single discipline or a subject. For example, chapter six on “Technology Adoption, Diffusion and Transfer” will be a good starting point for one who is not familiar with the same, and would like to know how it can help economic development. Each chapter contains a concluding section which captures the essence of the chapter with an analytical note.

The strongest aspect of the book is usage of published empirical research to strengthen the presentation of theoretical arguments. Like, role of social capital or traditional institution in change and development is derived exclusively from Kombi‐Naam of Africa. Footnotes, in addition to bibliography, are plenty, but enthuse the reader rather than annoying. For instance, Sokal's Hoax, publication of parody on physics in a referred humanities journal, is mentioned while discussing reactions of natural scientists” towards postmodern social studies of science (p. 85).

Though, the author, a development economist, forewarns that review of other disciplines is selective, he does a commendable job in reviewing other disciplines. The author hopes that the “book is not viewed merely as a work in intellectual history but as an inspiration for cross‐disciplinary research” (p. 272). This book has all to inspire and should be made a compulsory read for graduate students who study development and social policy, and policy agents. Multi‐disciplinary readers benefit by the boxes that simplify complex concepts and schematic representation used in the discussion. However, those with less academic orientation would find this book hard to read due to its discipline based technical content and strong theoretical treatment of issues.