James d. Gwartney

Exhibit 10: Export Volume After World Wars I and II (in Five
West European Economies)
900
800
700
600
500
400
300
200
100
After World War II
After World War I
In
d
e
x 
(1
9
1
8
=
1
9
4
6
=
1
0
0
)
1913/
38
1918/
46
1919/
47
1920/
48
1921/
49
1922/
50
1923/
51
1924/
52
1925/
53
1926/
54
1927/
55
1928/
56
1929/
57
Year

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122
Exhibit 11: Real Output After World Wars I and II (in Five West
European Economies)
200
180
160
140
120
100
80
Index (1918=1946=100)
Year
1913/
38
1918/
46
1919/
47
1920/
48
1921/
49
1922/
50
1923/
51
1924/
52
1925/
53
1926/
54
1927/
55
1928/
56
1929/
57
After World War II
After World War I
Freeing Europe’s regional and international trade from government restrictions
permitted economies to take advantage of specialization according to their comparative
advantage, and thereby expand more rapidly.

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123
Part 2 Final Thoughts
Video:
Development Economics
In recent years there has been a virtual explosion of scholarly research providing support for
the view that economic institutions
(?)
 and policies are the primary determinants of economic
growth and development. By economic institutions, we mean the legal requirements,
regulations, traditions, and customs that create the framework in which an economy operates.
They include constitutional mandates, legal processes, rules that govern exchange, and the
structure of monetary arrangements. Economic policies are defined as more specific political
actions that can be altered much more quickly than institutions.
The area of study that analyzes the impact of institutions and policies on economic
growth, development, and performance is known as the New Institutional Economics.
Institutions and policies that encourage productive actions and discourage predatory behavior
are regarded as providing the key to economic growth and prosperity. Numerous econometric
studies have examined the improvement in institution quality generated by the transition from
communism and have found that countries that moved faster to develop good institutions
generally performed much better economically.
(51)
While there is some debate about the precise institutions that are most appropriate for
the achievement of rapid growth, there is considerable agreement that secure property rights,
open markets, monetary stability, and minimal trade restrictions are central to the
establishment of a sound institutional environment. The points outlined in this section reflect
the New Institutional Economics.