Vernon W. Ruttan. Social Science Knowledge and Economic Development: An Institutional Design Perspective.

Vernon W. Ruttan. Social Science Knowledge and Economic Development: An Institutional Design Perspective. University of Michigan Press, AnnArbor, MI. $85.

For those interested in promoting economic development, what do advances in the social sciences have to offer? In particular, what does social science knowledge tell us about the types of institutions that foster economic development and the conditions under which they come into being? These are the questions addressed by Professor Ruttan in this book. It has its origins in a set of essays written by him over a number of years and these are modified in an attempt to provide a coherent response to the above questions.

Institutions are defined very broadly to include any societal rules that govern behavior and facilitate coordination. The central premise here is that economic development requires institutional innovation. A variety of local and global processes such as demographic change, international trade, new political and economic ideologies, and economic expansion itself, create large potential gains from institutional change. Social science research affects the supply of institutional innovation by pointing to the types of institutions that function well in particular settings. Major changes of this type often rely on social consensus, which in turn depends on culture and the distribution of political and economic resources. This is why questions of institutional change lend themselves so naturally to interdisciplinary research within the social sciences.

The book is divided into three parts. The first part consists of a single chapter which articulates the author's view that institutional change is an endogenous response rather than a random variable. Many historically significant improvements in material well-being are connected with changes in property rights and by the emergence of informal institutions which allow for more efficient social contracts. The best examples in this section, and throughout the book, relate to the diffusion of agricultural technology in Asia.

The potential productivity of agriculture in many Asian countries increased dramatically in the third quarter of the twentieth century with the spread of irrigation and the introduction of high-yielding varieties of seeds. Achieving higher yields required more intensive cultivation and a combination of new tenancy laws and informal arrangements. These features raised the marginal return to cultivator effort. Micro-data from the Philippines is used to document the move from share tenancy to leasehold contracts. The Philippine story is especially interesting because it illustrates how legal and informal institutions might interact to bring about the new institutional equilibrium. The new law allowed for a transfer of land from share-tenancy to leasehold contracts but based rents on past yields. The result was rents that were well below equilibrium levels and therefore plots that were too large. In the years that followed, sub-tenancy became widespread even though it remained illegal under the new law. Thus legal reform, though crucially important, is often only a part of most stories of institutional change.

The second part of the book is a tour through the social science disciplines; anthropology, sociology, political science and economics, with a view to gather the insights they offer, individually and collectively, into the determinants of successful institutional innovation. Chapters 2 and 3 examine various hypotheses on the role of culture and social relations in national development. The chapter on political development discusses the role of political power on economic development and on the features of decentralized institutions that have successfully managed common-pool resources. The following chapter summarizes the evolution of theories of economic growth during the twentieth century.

This part of the book covers a large and disparate literature and is not an easy read. It is at once too inclusive in method and too selective within each discipline. What it does offer is some insight into the causes for limited dialogue across the social sciences on questions of institutional change. Very little of the research in anthropology, sociology and political science penetrated mainstream economics. Professor Ruttan argues convincingly that theories linking culture to development did not provide economists with a clear analytical framework that could be used to test these theories. This has limited the ability of these fields to comment on questions of good institutional design. In fact, Postmodernism brought with it an aversion to ranking or evaluating local knowledge and social structure in functionalist ways and this made it difficult to ask questions about the types of social relations that were most conducive to economic development. For example, studies of differences in the productivity of immigrants using identical machinery and similar education have often invoked cultural explanations, In this regard, the superior public infrastructure in Japan and its early arrival are sometimes attributed to a culture of voluntary labor contributions. Similarly, the caste system prevailing in South Asia could plausibly have prevented participatory activities at the village level. Culture clearly seemed to matter, yet until recently, most economists have continued to push standard microeconomic tools as far as they could, viewing the peasant as poor but efficient, rationally responding to a set of constraints that are often overlooked by researchers.

The third and final section of the book discusses several specific institutions which have played an important role in the diffusion of technology. There are many fascinating and unfamiliar stories here on technology diffusion through a combination of public institutions and local initiatives. The Groupements Naam in sub-Saharan Africa are a good illustration of how new agricultural knowledge created in public institutions can be disseminated and implemented through local mutual assistance groups. There is also a discussion of the ways in which religion might affect the organization of economic activity. It is argued that the structures and strictures of different religions may influence the dissemination of scientific knowledge and may therefore explain, in part, the divergence after the fourteenth century between the early industrializing countries in Europe and North America and the Chinese, Indian, and Middle Eastern countries.

It is impossible not to be selective in this type of an enterprise, given the diversity of method and ideology in social science research. There were several occasions where one could not help feeling that important contributions were omitted and more appropriate choices could have made the book more coherent. Empirical studies in both economics and political science have proliferated in the last two decades and some of these have managed to bridge some of the methodological divides in social science research. For example, the long discussion of growth theory, which is possibly the least institutional component of development economics, could have been omitted in favor of empirical research on the determinants of collective action. In spite of these shortcomings, it is hard not to be impressed by Professor Ruttan's scholarship. There are no definitive answers but the various anecdotes, case studies, and conjectures provoke the reader to think about how societies change in ways that allow them to create and absorb new technology. We learn to look far and wide for answers to institutional puzzles.

Rohini Somanathan

Delhi School of Economics