Harvard economist Melissa Dell recently won the 2020 John Bates Clark medal, which is given to outstanding economists younger than 40. Dell’s most famous research concerns the importance of institutions in a country's long-term political and economic development. It carries a dire warning for the U.S. as well as other nations.
What is an institution? To most people it means well-established organizations, such as big businesses or the civil service. Economists use the word more generally to mean the rules of the game that govern human society. These can be official rules such as laws, electoral systems and property rights, or informal ones such as social customs, corruption or selective enforcement of laws. That’s an incredibly broad definition. But the key idea is that institutions of both the formal and informal kind last for a long time and govern human behavior in ways that can’t easily be explained by rational individual action.