The Geopolitical Context for Institutional Change: The Case of Prussia in the 17th and 18th Century

After the "institutional turn" economists are now in a lively debate about the role of institutions for growth as well as the sources of institutional change. This paper discusses institutional change in Prussia in the 17th and 18th century. It shows the importance of the geopolitical context for understanding institutional change. Using three political events, the paper combines geographical, institutional and political arguments and highlights how context-sensitive institutional change can be. Prussia’s institutional change was heavily influenced by its many direct neighbours and the political necessities of that time. Therefore, time and space (location) are highly relevant for institutional change.