The Constitution and RBI are two mighty pillars on which India’s stability rests
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Subscribe to enjoy similar stories. The formidable institutional structure of the US will be severely tested today by both the presidential election process and its aftermath, whatever the outcome. Economists define institutions to include the functioning of public protective frameworks.
They also include social mores and values, which can vary regionally within a large country like India. For example, cash remittances (‘money orders’) at one time, not so long ago, did not reach their intended recipients in some parts of India, although they did in other regions, despite the money order being an instrument run by a nationally uniform postal system. In destinations where money orders did not reach, that one failure alone meant greater poverty.
Institutional frameworks matter. Daron Acemoglu, Simon Johnson and James Robinson were awarded the Nobel economics prize for establishing the causal importance of protective institutions in enabling widespread prosperity, after painstakingly ruling out reverse causality (prosperity leading to better institutions). Their work showed that European colonization in areas settled by Europeans (like North America) was accompanied by public institutions protective of life and economic activity, at least of European settlers (indigenous inhabitants were eliminated or pushed out of sight).
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