In light of the results we have brought out, this argument is not persuasive. First, the fact
that even the Polity measures of institutions are more volatile and more mean reverting than years
of schooling raises severe doubts that these variables, even if averaged, reflect anything more
permanent than human capital. Second, this argument does not deal with the obvious point of
reverse causality, and the fact that initial measures of political institutions, in just about any sample,
seem to have no predictive power at all. Indeed, even if we follow the recommendation that
constraints on the executive must be averaged, but regress ten year growth rates on the average
constraints of the executive over the previous decade, these averages do not predict subsequent
economic growth. The results are very similar to those in Table 5. Averaging itself, without
regressing growth on contemporaneous average institutional quality, does not suggest that
institutions predict growth. Third, the lack of correlation between even the average outcome
measures and the constitutional constraints on government raises still further doubts that anything
deep is being measured. In sum, while there might be (though certainly does not need to be)
something “deep” about institutions, it is implausible to argue that the variables used in the
standard growth regressions capture anything “deep”.
What do we learn from this analysis? To us, the principal conclusion is that, at least in the
OLS regressions, the evidence that institutions cause economic growth, as opposed to growth
improving institutions, is non-existent. The objective measures of institutions, those that actually
describe the constitutional rules that limit the power of the sovereign, have no predictive power for
the growth of per capita income. Even the beginning-of-period executive constraints have no
predictive power. In contrast, the political variables that are correlated with development are
themselves by construction a product of development. The OLS cross-country evidence for 1960-
2000 provides no support for the claim that “institutions cause growth.”