When Douglass North reminded us many years ago that ‘institutions matter’, it provided a welcome antidote to the rather cavalier approach that had hitherto characterised scholarship on Latin America's economic and social development. Within a short period, however, the mantra had gone from ‘institutions matter’ to ‘institutions are the only things that matter’. In other words, the pendulum swung too far.

This book, by two sociologists of the region, sets out to establish a rigorous framework for determining which institutions matter, to what extent institutions make a difference and how they evolve. To do this the authors focus on five institutions: stock exchanges, tax authorities, public health services, postal systems and civil aviation authorities. Ideally they would have looked at these five institutions in all Latin American republics, but for obvious reasons they had to limit the choice of countries, and they chose five: Argentina, Chile, Colombia, the Dominican Republic and Mexico.

In theory this would result in 25 case studies, but the number was reduced to 23 on the grounds that ‘There is no stock exchange in the Dominican Republic and, due to time limitations, the Argentine public health service was not included’ (p. 28). These studies were then carried out by teams of researchers in each country. The authors summarise the results of the studies by country, with the case studies themselves being available on the internet to the interested reader. These five chapters are followed by the authors’ conclusions and preceded by two chapters where they set out the theoretical framework.

The case studies, both of institutions and countries, are interesting and detailed. Sometimes the level of detail is almost overwhelming, yet this is often necessary to understand what is really going on. The reason is that the authors identify six conditions for institutions to contribute to national development: meritocratic recruitment and promotion; immunity from corruption; absence of ‘islands of power’; proactivity; technological flexibility; and countervailing power.

We learn, therefore, of the difficulty of maintaining a meritocracy where political or family pressures are very strong (the study of the Argentine Post Office is a case in point). Establishing immunity to corruption has also proved difficult in a number of the institutions studied here, while avoiding ‘islands of power’ is considered essential for maintaining the integrity of an institution (Colombia scores highly on this measure – see p. 92). Yet the authors argue that the most important variable for establishing whether an institution contributes to national development is in fact ‘proactivity’. They define this as the ‘ability of the organization to involve itself with clients, users and other relevant actors in its institutional environment’.

The authors use all this information to rank institutions by country in a series of ways. They start with a ‘truth table’ (p. 34) where each institution scores one or zero on two criteria: institutional adequacy and contribution to development. Chile scores a perfect ten in this table, which may seem excessive to some. Colombia scores a dismal two, with none of its five institutions being considered as making a contribution to development. The other three countries are in the middle. Other tables do not essentially change these rankings, with Chile always scoring the highest.

This may seem plausible in view of Chile's impressive economic performance since the mid-1980s and certainly suggests that institutions do matter. However, it is also the case that Colombia has performed well on conventional economic criteria over the same period, which might suggest that institutions do not matter. The more likely conclusion is either that the institutions studied here do not matter that much in terms of economic development, which would certainly be true of the stock markets in the countries studied, or that alternative arrangements evolve in societies where institutions do not function well (for example, the Post Office).

This book is therefore more limited in what we can learn from it than the authors claim. The case studies, and the authors’ summaries by country, are very illuminating and can be read with interest by all those who study any of the five institutions or the five countries. Yet the book does not really tell us how crucial these institutions are in the development process, nor does it answer the question about endogeneity: does the high score of Chilean institutions result in superior economic performance, or does superior economic performance lead to improved institutions? Similarly, the case studies of institutions in the Dominican Republic do not inspire confidence in the country's ability to make social and economic advances, yet the Dominican Republic is widely seen as one of the best performers in the Caribbean today and is regarded with some envy by its neighbours for the progress it has made.