Question

Economists argue that some environments are more conducive to economic growth than others. One of the ways economists differentiate one environment from another is in terms of its institutions. An institution is “the rules of the game in a society or, more formally, the humanly devised constraints that shape human interaction: the rules and regulations, laws, customs, and business practices of a country.” Do you agree that institutions are conducive to economic growth? If so, how? Briefly discuss.

Answer 1

Institutions are indeed conductive to economic growth where the development and the production activity depends on the rules and regulations and the laws made as well. It gets to change the entire wproduction scenario such as the time shifts, the wages, the contractors, the quality of the raw material supplied, the local traditions and the laws. For example is the law of taxation is friendly, the more institutions will set up make more productivity with which economic growth can be enhanced. In this way, institutions are conducive to economic growth.