The Importance of Institutions in Economic Growth

Institutions are identified as the fundamental cause of economic growth, as posited by a leading economist. This viewpoint challenges previous theories that prioritized geography or culture as primary drivers of economic disparity among nations. Using historical examples, such as the contrasting economic outcomes between North and South Korea and border towns in the United States and Mexico, institutions are shown to fundamentally influence economic performance. The idea that institutions shape market dynamics and growth trajectories is emphasized, ultimately asserting that inclusive institutions facilitate stronger economic growth compared to extractive ones.