State of the Art in Governance Indicators

Governance is a new term in the development dictionary but the underlying concept is as old as human civilization. Effective governance of natural, economic, and human resources has been the hallmark of most successful civilizations. There had always been an institutional basis for the material wealth and the political power of great nations and empires. The concept was not novel for economists either. The writings of some earlier economists, such as Adam Smith, Joseph Shumpeter, and Simon Kuznets, to name but a few, contain plenty of subtle references to some of the central concerns embodied in the present day concept of governance. Though politics seems to be a term arcane to most economists today, the subject of economics was historically treated in the framework of ‘Political Economy.’ Asian Drama, the famous treatise of Swedish Nobel Prize Winner Gunnar Myrdal is known more for its institutional analysis and less for its economic explanation of poverty. Other contemporary economic thinkers, such as Hirschman, Coase, Olson, North, and Stiglitz, among others, have emphasized the interface between institutions and economic forces. Thanks to these and more recent economists and social scientists, it is generally recognized today that a stable political, institutional, and social framework is an essential precondition for economic growth and development.