Economics Quote by Douglass C. North
““But so, too, can unproductive paths persist. The increasing returns characteristic of an initial set of institutions that provide disincentives to productive activity will create organizations and interest groups with a stake in the existing constraints. They will shape the polity in their interests…Such institutions provide incentives that may encourage military domination of the polity and economy, religious fanaticism, or plain, simple redistributive organizations, but they provide few rewards from increases in the stock and dissemination of economically useful knowledge… The subjective mental constructs of the participants will evolve an ideology that not only rationalizes the society's structure but accounts for its poor performance. As a result the economy will evolve policies that reinforce the existing incentives and organisations.””
About This Quote
Source Book: Institutions, Institutional Change and Economic Performance, 1990
Established institutions create self‑reinforcing incentives that hinder productivity, fostering groups that preserve the status quo despite poor outcomes.
In simple terms: Old institutions block progress.
Key Takeaway
Identify and challenge entrenched incentives.
Themes
economics
politics
institutional inertia
policy
ideology
Mood
analytical
critical
Type
scholarly
philosophical
When to use this quote
- government reform
- economic development
- education reform
Key Concepts
path dependency
interest groups
policy feedback loops
Questions to Reflect On
- What incentives sustain current institutions?
- How can reform overcome entrenched interests?
A Different Perspective
Change is often resisted by powerful interests.
![“My comments are directed at the system which was responsible for their poor performance, not at the officers concerned. I do not recall ever having taken part [before the war] in an exercise that was other than a set ritual, which, while not without value, certainly did little to prepare us for…” quote by Gilbert Andrew Hugh Gordon](https://sms4smile.com/quotes/img-quotes/12c/gilbert-andrew-hugh-gordon-156_poor-performance_my-comments-are-directed-at-the-system-w_497405.jpg)
