It may be no coincidence that those countries that grew most rapidly in the late twentieth century—including South Korea, China, and, of late, India—were relatively developed civilizations when Western Europe began its overseas expansion five centuries ago. In this article the authors explore the literature showing that institutions matter to growth, then examine new evidence that the ‘social capability’ to achieve growth is a function of capacities that go beyond the formal education system. Remarkably, a long history of nationhood at the time of Columbus means better odds of growth today.

Human beings display a complex set of behavioural predispositions, including a strong inclination to pursue self-interest but also empathy, receptivity to norms of reciprocity, and an inclination to punish violators of such norms. Not only are workable economic arrangements constrained by the types of people a society shapes from the genetic material at hand, but also, the arrangements adopted will themselves strengthen or weaken dispositions towards reciprocity and other behaviors. Here the case is argued for considering the two-way interaction between institutions and values by discussing three examples: the workplace, the family, and social insurance systems.