It's true that one of the shady aspects of economics is the tendency to lump anything thats not observable in the model into an exogenous catch-all "intangible

It's true that one of the shady aspects of economics is the tendency to lump anything thats not observable in the model into an exogenous catch-all "intangible factors" variable. But fair play to economists, they have been banging on about the role of institutions as a key determinant to economic growth for a while now. For example: http://econpapers.repec.org/article/tafapeclt/v_3A11_3Ay_3A2004_3Ai_3A9_3Ap_3A587-590.htm http://econpapers.repec.org/article/tafapeclt/v_3A11_3Ay_3A2...) In part it's because the empirical data supports their view, though there's obviously a retrospective bias and a chicken and egg problem - did good institutions result from economic growth or vice versa?