Douglass North, John Wallis, and Barry Weingast refrain from undue modesty in promising a “framework for interpreting recorded human history,” and they deliver as advertised. They aim at nothing less than explaining democracy, economic development, and domestic social peace, which, they say, tend to go together for reasons that have heretofore eluded explanation by social science. The “omitted factor” that they say causes these good outcomes is the “open access” pattern of social relationships, based on impersonal rules that provide universal access to the benefits of political and economic organizations (p. 13).

Do not be discouraged if this sounds like an all-too-familiar paean to the benign efficiency of democratic and market institutions, which might be off-putting to some readers in the wake of the global financial meltdown. North, Wallis, and Weingast estimate that only about 25 countries, encompassing about 15% of the world's population, live in open-access societies. Much of the action in their analysis pertains to the remaining 85% who live in limited-access societies, which the authors call “the natural state,” and in societies undergoing transition toward an open-access system (p. xii).

The book's distinctive contribution lies in presenting the logic of stable social order in societies dominated by elite groups that use the threat of violence to extort economic privileges from the state. Contra Max Weber, “the natural state” does not monopolize legitimate violence, but instead it brokers an elite consensus in which armed groups tolerate domestic peace in exchange for the right to extract economic rents from economic monopolies, subsidies, and tax havens. Unlike the impersonal categories and rules of the open-access order, this limited-access order reflects special deals based on personalistic ties of kinship, patronage, social networks, or cultural identities.

The authors distinguish among three levels in the capacity of natural states to support the development of successful organizations: “fragile states,” in which the state can barely hold together the elite consensus for civil peace; “basic natural states,” in which organizations form only inside the state; and “mature natural states,” which support the development of commercial and civic organizations outside the state. Although mature natural states are mainly stabilized by a domestic balance between factions whose power is based on the threat of violence, they have also begun to develop some institutional features to regulate relations among elites. In particular, three “doorstep conditions” place some mature natural states at the threshold of transition to an open-access system—rule of law governing relations among elites, impersonal corporate organizations that outlive the people in them, and civilian control over the military (p. 150). While these arrangements are functionally consistent with the balancing and rent-seeking logic of the natural state, they also create the capacity to move toward a rule-governed open-access system by preparing the way to extend rule of law and participation in impersonal organizations to the broad mass of the population.

A crucial implication of this theory is that institutions that may look superficially the same in open and limited-access orders function differently in the way they maintain stability in these different systems. For example, elections must be free and fair to sustain stability in an open-access system, but they must be manipulated in limited-access systems to ensure that elite balance is not disrupted (p. 267). Consequently, reformers who try to enforce open-access rules upon the “corrupt” workings of natural states that lack the three doorstep conditions are likely to cause violent disorder, not liberal democracy.

North, Wallis, and Weingast call their intellectual edifice a framework rather than a theory, but like a theory, the book has a coherent argument that is anchored in a consistent social ontology, in this case a form of rational institutionalism that makes room for beliefs. The authors try to show how elite bargains give rise to institutions that facilitate social change, but they shy away from making any particular evolutionary predictions on the grounds that exogenous shocks, subjective beliefs, or lack of incentives to change can affect actors' choices (p. 21). Natural states can reach the “doorstep” to open access yet fail to pass through. Likewise, relatively well institutionalized natural states can and frequently do relapse to lower levels of capacity.

The conceptual framework is constructed of familiar building blocks adapted from rational institutionalism, variations on modernization theory, and classic social theory, but the resulting bricolage is original both in the way it assembles these parts and in differentiating its arguments from those of its sources. Like Weber, the authors are concerned with the state's monopolization of violence, but they warn against applying this idea to states that bargain with armed domestic elites. Like Karl Marx, they are concerned both with the logic of social equilibrium at each stage of development and with the creation of incentives to evolve to a new stage, yet they avoid the trap of historically unpersuasive deterministic claims. While inspired by theories of Mancur Olson and Gordon Tullock, they set out to turn them “on their heads,” arguing that excessive rent seeking is easily checked in open-access orders and serves mainly to press government to be responsive to citizen interests (p. 140). Like Charles Tilly, they agree that war made the state, but they try to go beyond his analysis by endogenizing his crucial variable: whether the state is coercion or capital intensive (p. 176). And like Daron Acemoglu and James Robinson, they use the deductive tools of modern political economy to explain the origins of democracy, though they argue that democracy is not about redistribution of wealth from elites to masses but about the creation of institutional public goods that benefit both elites and masses (p. 143). In short, theoretical strands that look superficially familiar are rewoven in a tour de force that yields an original design.

One curiously missing strand is any reference to realist theory or the security dilemma, which Barry Posen and others have convincingly applied to civil wars.Footnote ¹ North, Wallis, and Weingast portray elites in the natural state as facing the dilemma of how to commit not to use armed force against each other. They argue that this commitment problem is resolved through a pact between the state and elite groups to allocate sufficient economic rents to take away armed groups' incentive to use force for economic gain (pp. 18–19). The problem from a realist standpoint, however, is that rival armed groups need reassurance not only about rents but about security from attack, a fundamental problem on which this book is silent.

The framework's broad and underdetermined predictions render falsification by evidence difficult. Most of the detailed empirical material in the book, such as a long disquisition on English land tenure, takes the form of “analytic narrative,” in which historical processes are redescribed in terms of the framework's abstract categories (p. 82). These accounts illustrate the logic of the argument, but they might be criticized as ex post facto “just so” stories. That said, the book does contain falsifiable empirical statements (e.g., “the origin of legal systems lies in the definition of elite privileges” [p. 49]), which social scientists and historians should find rewarding to try to test.

The book has profound implications for efforts to engineer democratic and economic development. Like recent research on red wine and dark chocolate, everything you thought was bad for you turns out to be good, and vice versa. Orderly corruption and electoral manipulation turn out to be good in natural states, because they preserve social peace and allow the gradual development of rule-governed relations among elites. Natural states advance toward impersonal social relations by partial steps as they mature. Instead of making an unsustainable leap to create encompassing impersonal categories like “citizen,” they create semi-impersonal categories that treat all individuals of a given status—nobles, clerics, whites, party members—as juridical equals. Once rule of law and impersonal forms of organization are established among elites in this way, such practices can be extended to the entire population, if an elite faction sees an advantage in it.

This insight provides the strongest theoretical basis yet for the view that successful democratic transitions need to be carried out in a sequence that starts with the building of effective administrative and legal institutions, and then embarks on unfettered mass electoral politics only when those institutional reforms have achieved some traction.Footnote ² This is both good and bad news for efficient authoritarian regimes on the Chinese model. On the one hand, it implies that the outside world should tolerate China's orderly elite consensus as a step toward maturing its natural state and preparing the doorstep conditions for a transition to an open-access system. On the other hand, it implies that economic growth will be unsustainable unless the Chinese elites agree sooner or later to step across that threshold. North, Wallis, and Weingast have thus given us valuable tools for thinking about some of the most important issues of our own day, as well as the rest of “recorded human history.”