| Why institutions matter to achieving economic and | | | | department of mines, a geological survey, a mineral |
| social development is certainly not a question that has | | | | promotion agency and an environmental office. |
| arisen only in the context of mineral-rich countries. | | | | While the earlier theoretical literature underlined formal |
| Social scientists have long pointed to institutions as well | | | | institutions, such as legal systems, property rights and |
| as institutional change to explain economic and social | | | | contracts, the more recent conceptual work has |
| transformations. This emphasis has been revived by | | | | stressed the importance of informal institutions and |
| recent institutional theorists with backgrounds in | | | | how they relate to formal institutions.Reforms |
| disciplines as diverse as sociology, comparative history, | | | | re-assigning property rights have not considered that |
| political science and economics. | | | | property rights are social constructs and so in order to |
| Diversity in conceptual thinking on the relationship | | | | be stable and secure they require legitimacy.Thus, the |
| between institutions and economic and social | | | | theoretical policy arguments would appear to shift |
| outcomes is reflected in the fact that there is not just | | | | away from pointing to the existence of a particular |
| one definition of what institutions actually are. Institutions | | | | laws or policies on paper and move towards |
| are the rules of the game in a society or... are the | | | | emphasizing the importance of the joint perception of |
| humanly devised constraints that shape human | | | | economic, political and social actors that particular laws |
| interaction. More recent theoretical developments have | | | | or policies are appropriate and legitimate. |
| defined institutions at an even more abstract level.For | | | | There clearly is a disjuncture between the theoretical |
| example consider them to represent a system of | | | | claims and practical policy advice. The ideas that have |
| social factors that conjointly generate a regularity of | | | | guided the theoretical debate are not pinned to |
| behavior. | | | | particular claims regarding specific types of institutions. |
| Stocktaking of recent theoretical contributions confirms | | | | But the diversity of definitions and theoretical concepts |
| that it is at the higher order levels where the study of | | | | may have lent itself to practical policy advice latching |
| institutions still requires more attention. This includes | | | | onto particular types of tangible formal institutions to |
| questions such as how institutions are embedded in | | | | make these the target of reforms. Examples include |
| societies, how power relations are to be interpreted | | | | model laws, regulations, organizational set-ups and |
| and how the bureaucratic functions of government are | | | | even software solutions in sectors as diverse as |
| to be understood? The related governance debate | | | | natural resource management, transport, public finance |
| emphasizes the rules of the political game and a | | | | and public administration. The challenge is that |
| country capacity to implement and enforce public | | | | transplanting formalized types of institutions across |
| policies and to improve public sector coordination with | | | | diverse countries has failed to produce consistent |
| the private sector. | | | | outcomes. While this result does not point to the |
| Theoretical work has linked the importance of | | | | complete failure of the conventional reform approach, |
| institutions for development to a range of different | | | | it places the success factors outside the remit of |
| micro-economic functions, such as overcoming | | | | conventional policy advice. |
| collective action problems, eliminating uncertainty in the | | | | On the observation that many poorly performing |
| context of bounded rationality and reducing transaction | | | | countries are autocratic it was tested the often |
| costs. It has been argued that if it was not for the | | | | repeated proposition that democratization helps |
| existence of institutions, the problems underlying these | | | | resource-rich countries to manage resource wealth |
| functions would undermine the pursuit of productive | | | | better. They draw a distinction between democracy |
| economic activities. For example, institutions can take a | | | | as an electoral process and a strong system of |
| coordinating function by encouraging productive | | | | checks and balances. |
| behavior, including learning and innovations, or they can | | | | In turn, a strong system of checks and balances does |
| prevent actions that would otherwise undermine social | | | | not necessarily require a democratic electoral process. |
| cohesion and evoke distributional conflicts. | | | | Those autocracies that have performed well in |
| Policy-practitioners in turn have often referred to good | | | | economic terms have been found to uphold strong |
| institutions as particular types of organizations or | | | | systems of checks and balances preventing |
| policies, for example a particular type of trade regime, | | | | unproductive rent-seeking and the inefficient use of |
| independent central banks, semi-autonomous agencies | | | | public resources. This finding suggests that rather than |
| that provide a particular type of public services or | | | | focusing on regime type, more emphasis should be |
| standardized tools for public financial management. | | | | placed on how political-administrative systems work, |
| Policy recommendations for the mining sector in the | | | | and what checks and balances they provide across |
| early 1990s emphasized the creation of five institutions | | | | the public sector and between the public sector and |
| with specific roles, including a ministry of mines, a | | | | society. |