The New Comparative Economics1

In recent years, comparative economics experienced a revival, with a new focus on comparing capitalist economies. The theme of the new research that institutions exert a profound influence on economic development. We argue that, to understand capitalist institutions, one needs to understand the basic tradeoff between the costs of disorder (private misconduct) and those of dictatorship (public misconduct). We then apply this logic to study the structure of efficient institutions, the consequences of colonial transplantation, and the politics of institutional choice. 1We are grateful to Daron Acemoglu, Olivier Blanchard, and Lawrence Summers for helpful comments. I. Introduction. The traditional field of comparative economics deals with the comparisons of socialism and capitalism2. Under socialism, the principal mechanism of resource allocation is central planning. Under capitalism, this mechanism is the market. The field of comparative economics, which dates back at least to the discussions of market socialism in the 1930s, asks under wha