How do you evaluate institutions and governance for economic development?

Historical context is critical in order to evaluate institutional effectiveness, especially in regions that are developing economically. For instance, many nations that today are developing economically, especially those in Africa, have a legacy of colonialism. Colonial-era “native” rule policies empowered a small group of local elites, who then went on to control the politics and economies of post-independence African countries. Unfortunately, this legacy created a pervasive a culture of "strong men", instead of "strong institutions", which has contributed to persistent conflict, poverty and high-levels of distrust in institutions across the continent up to today.

Evaluation of institutions and governance for economic development have to be context-specific. This is because all institutions evolve. While the evolution of institutions and their impact on economic growth and development could be tracked by doing a life cycle analysis, evaluating the effect of governance on economic development would require a different approach. Governance mechanisms usually have much broader objectives and would require the deployment of appropriate tools to evaluate their effect on several areas of attention. Institutions can be evaluated as an entity or part of a group of entities, permitting the use of a wide range of tools, depending on the objective of the study.

Institutions and governance are important for economic development because they provide the framework for economic activity. - To evaluate institutions and governance for economic development, we can look at the following factors: - The rule of law: Does the government enforce the law fairly and consistently? - Property rights: Are property rights secure and respected? - Transparency and accountability: Is the government transparent and accountable to its citizens? - Stability: Is the political and economic system stable? Inclusiveness: Do all citizens have equal opportunities to participate in the economy?

In the context of the Colonial Origins of Comparative Development (Acemoglu, Johnson, & Robinson, 2001), evaluating institutions and governance for economic development involves examining their historical origins, notably colonization policies. The type of institution (extractive or "Neo-Europe") influences economic performance. Mortality rates of early European settlers, as a measure of the feasibility of settlements, helps evaluate institutional impact, with higher mortality rates often linked to poorer current institutions and lower GDP per capita. This underscores the importance of institutional quality in economic development.

Evaluating institutions and governance for economic development is a complex task that requires various methods. Institutions and governance are the rules and norms that affect the behavior and performance of individuals, firms, and governments in the economy. They impact economic outcomes such as growth, poverty, inequality, innovation, etc. There are many indicators that measure and compare institutional quality across countries and regions, but they are not perfect. There are also many frameworks and methods that analyze how institutions and governance work in different domains and sectors of the economy, and help understand the possibilities and challenges for institutional change and improvement.

Additionally, Market Signals can be used like pricing of Credit Default Swaps and Credit Ratings. Other than Indexes, Rankings can also help in that assessment. On descriptive side, one can look at live actors analysis such as by Bismark Brief.

Evaluating institutions for economic development involves assessing their economic policies, political structures, rule of law, transparency/accountability, and social factors. Key considerations include fiscal responsibility, promotion of trade and investment, political stability, enforcement of property rights and contracts, corruption prevention measures, and prioritization of education, health, and social security. These factors collectively shape an institution's ability to foster economic growth and development.

Considering Institutions we see around us have a certain strain of development and we also analyse them through eyes of these Institutions, this might result in near sightedness. In absolute analysis, one has to ask, what would a certain agent from past would think about current function of these Institutions.

When it comes to identifying institutional challenges in specific economic sectors and countries, one pivotal aspect takes center stage—the consistency between agents' contractual relationships and the complex web of both formal and informal rules. Formal rules entail the established bureaucracy, legislation, and the defining features of the judicial system. On the other hand, the informal rules are related to culture, exerting a pervasive, and even cognitive, influence on the agents involved. Recognizing and addressing consistency between contracts and rules becomes paramount to promoting economic efficiency.

As Institutions don't exist in isolation, they may decay or rise in tendam. A wholesale creation of new Institutions as a class or collapse of them, is something outsiders have to do. Sometimes these analysis may not capture the malaise or opportunity present.

All Institutions compete for relevance or atleast those which appear relevant, survive. Hence there would be a bias towards "action" and "intervention" rather than detached observation or refraining from making "impact" if situation has little scope of improvement. Sometimes it may be warranted to do a thought experiment in thinking if certain institution did not exist, would anyone create them again and what would their structure be? This is not a tool but an exercise in Imagination which does not inspire confidence in such method of analysis. But one has to see that someone imagined those Institutions in first place.

I differ with the above assertion on the topic under discussion give the fact that comparison leads to compromises and borrowing approaches that in most cases prove counter productive. It is pertinent that when evaluating institution and governance system for expected outcome and impact, the existing rule of law and the inclusive practice be examined. This is the innovative art of institutional restructuring for ownership and sustainability. Any institution whose governance lacks genuine participation and ownership cannot produce the expected result and or the expected economic outcome and development dividend in a given society.