And a dynamic model of economic change entails as an integral part of that model analysis of the polity since it is the polity that specifies and enforces the formal rules…. Development economists have typically treated the state as either exogenous or as a benign actor in the development process.
Neoclassical economists have implicitly assumed that institutions (economic as well as political) don’t matter and that the static analysis embodied in allocative efficiency models should be the guide to policy; that is, ‘getting the prices right’ by eliminating exchange and price controls.