Friday, January 21, 2005

Is it Technology or Institutions?

Oliver Williamson quotes Hayek in his Economic Institutions of Capitalism:

How easy it is for an inefficient manager to dissipate the differentials on which profitability rests and that it is possible, with the same technical facilities, to produce with a great variety of costs, are among the commonplaces of business experience which do not seem to be equally familiar to the study of the economist.

It is easy to get carried away when thinking about technological transfer and growth in the developing world. The same technologies for car production, for example, exist pretty much all over the world, and yet the incentives to produce are different, and therefore so is the efficiency. Unfortunately, it is not as easy to import things like trust as it is to import a computer, or even a freshly minted (or experienced) MBA.


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