Institution and Change of the Public Economy: A New Interpretation of Early Modern Civilization Evolution

Abstract

The causes of the evolution of human civilization have drawn much attention among social scientists. The new institutional economics (NIE) and its model of property rights explain the rise of the West Europe, but not the Industrial Revolution itself; nor have they addressed the causes for the rise and fall of civilizations in the East. By defining human civilization within the context of the public economic institution, we interpret this change in the public economic institution using swings in the demand structure of public goods. We see these swings as a contributing cause of the evolution of human civilization from traditional to modern. Our conclusions show that the shifts of public economic institutions between the mass democratic one and the elite constitutional one contributes to the current modern economic crisis and the stagnancy of modern civilization.