Douglas North as one of the leading lights of the new institutional economics has the following to say on the centrality of institutions: The fundamental issue can be stated succinctly. Successful development policy entails an understanding of the dynamics of economic change if the policies pursued are to have the desired consequences.
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.