2.According to Rosenberg and Birdzell: • “The system that generated Western econ

Question

2.According to Rosenberg and Birdzell:

• “The system that generated Western economic growth evolved before it was recognized as a system or advocated as an ideology.” (p. xi)

• “The West’s economic resources are its wealth; the problem is how the West generated the organizational and technological skills required to produce and exploit that wealth.” (p. 10)

Organizations - Markets - Competition

Using North’s ideas about institutions and the simplified form of our Drucker -Alchian -Hayek model sketched above as an organizing framework,

Describes and explains the institutions identified by Rosenberg and Birdzell that led to sustained productivity-driven economic growth in the Wes.

Explanation / Answer

In the view of North institution is the result of human interaction. Changes in the organisation takes place based on the rational interest of human to structure the world in order to maximise benefits. Transaction cost plays an important role in changing the institutions. In the later stage, North separated the concepts of organisation from the Institution. According to him, institution is the set of rules of the game and the means of enforcement, while the organisation actually plays the game. The sustainability of the institution is an outcome of the human capabilities for culture and cognitive rather than real time political and economic forces.

Drucker -Alchian -Hayek model stressed on the entreprenureship and innovative for the organisationla change and growth. This model stated that investment in R&D is not the only way for driving change. Every person associated with the organisation needs to adopt the innovative mind set. The vision of entreprenuership and flow of the innovative ideas and information from upstream to downstream drive the changes in the institutions and economic growth.

Therefore, according to Rosenberg and Birdzell, availability of capital and technology is not the only reason of economic growth and development of the Western countries. Their sucess came due to fostering innovative ideas and geberation of creative mind. They were able to create the condition that encoraged the innovation in technology, trade and organisation. Innovative ideas facilitated the private enterprise to take decision indpendently regarding the process of engageing accumulated capital, wealth and labour into the production so that benefits can be maximised.

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