Institutions Are Capital

Lynne Kiesling

Leave it to Will Wilkinson to put the point so clearly and succinctly: institutions are capital. They are capital with a very strong interaction with other inputs. One of Will’s commenters argues that institutions cannot be owned and are therefore not capital. I disagree. We have lots of examples of things we consider capital that are treated as a commons by choice or necessity. I do, though, think that’s an angle of analysis that is worth pursuing.

There’s much, much more to be said on the subject, much of which I hope to say here. In the short run, while I run around like a crazed chicken today, I will leave it at being grateful to Will for pointing out Frederic Sautet’s new policy primer, “The Role of Institutions in Entrepreneurship”. It’s a very good introduction to that topic, and does a very nice job of drawing the connections between institutions and entrepreneurship that can often be very elusive. He applies this analysis to development, but I think there are also lots of applications to institutional change and entrepreneurship right here, in, say, for example, the electric utility industry …