THE MARSHMALLOW EXPERIMENT AND ECONOMIC HISTORY.

THE MARSHMALLOW EXPERIMENT AND ECONOMIC HISTORY. The result of the experiment which showed that children who have reason to doubt that they will get a second marshmallow are less likely to defer eating the first one is consistent with a body of economic thinking that argues that institutions for enforcing contracts and establishing property rights have been critical for economic development. People will be reluctant to save or invest if the economic or legal environment is such they don’t believe they will keep the benefit of waiting (the second marshmallow). Worse, there are societies where if you don’t consume the first marshmallow immediately, you may never get to eat it. Douglass C. North won the Nobel Prize in Economics in 1993 for his work in economic history which emphasized property rights and institutions. This review essay by Philip Coelho assesses one of North’s books, finding flaws, but concluding that the book: “still makes significant contributions in its emphasis on an efficient set of property rights as a necessary condition for economic development to take place.”