In 1759, in his work Theory of Moral Sentiments, Adam Smith wrote that institutions are the framework  BIS central bankers’ speeches  1  However, in and of themselves, institutions are insufficient to ensure progress – the key is whether they are strong or weak.5 This is also the starting point for Daron Acemoglu and James Robinson’s book Why Nations Fail.6 They introduced the concepts inclusive and extractive institutions.7 •  Inclusive institutions do not forget why they exist: they remember that their purpose is to serve the people, as the term “public servant” aptly illustrates. A well functioning constitutional state makes cooperation and transactions simpler and cheaper. •  Extractive institutions, on the other hand, are found in countries where rulers govern without notable opposition, where the judicial system is not fair, and where rights are not equal for all. The authors refer to several examples where people groups with identical backgrounds and access to the same natural resources have developed differently because of institutional differences.8  for progress. Good institutions promote confidence and thereby efficiency in society. The Norwegian American Thorstein Veblen, 115 years ago, described institutions as the building blocks of economic development (see The Theory of the Leisure Class: An Economic Study of Institutions). In newer Norwegian research, Halvor Mehlum, Kalle Moene and Ragnar Torvik have documented that institutions determine whether a country will manage to utilise discovered resources (see “Institutions and the Resource Curse”, The Economic Journal 116, pp. 1–20).

Both as an educationist and as a politician, Steen made key contributions to the creation of the Norwegian comprehensive school. Source: Store Norske Leksikon, http://nbl.snl.no/Johannes_Steen/ utdypning. Internationally, the Society of Jesus is known as the founder of the modern school system, with a curriculum tailored to the child’s age and previous knowledge and schooling characterised by systematic progression. These pedagogical principles evolved gradually through the second half of the 1500s, culminating in 1598 with Ratio Studiorum, the official plan for Jesuit education (see O’Malley, J. W. (1993): The First Jesuits, Harvard University Press, Cambridge, Massachusetts). BIS central bankers’ speeches  3  1889. The result was a comprehensive school system that strengthened our collective identity.12 For Norwegians, it is easy to take inclusive institutions for granted. Throughout human history, however, it is extractive institutions that have been the norm. There were attempts to achieve a balance of power in regimes as disparate as ancient Rome, China and Venice. But they remained attempts. The inclusive institutions were replaced by nepotism and abuse of power. The economists Acemoglu and Robinson point to the Glorious Revolution as a turning point in history.13 The British Parliament permanently curtailed the power of the Crown. The UK did not become a democracy in the modern sense overnight, but checks and balances were introduced. The development of written laws and a judicial system featuring independent courts started. Patent laws were adopted and limited companies saw the light of day.