Institutions are the humanly devised constraints that structure political, economic, and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights). Throughout history, institutions have been devised by human beings to create order and reduce uncertainty in exchange. Together with the standard constraints of economics they define the choice set and therefore determine transaction and production costs and hence the profitability and feasibility of engaging in economic activity. They evolve incrementally, connecting the past with the present and the future; history in consequence is largely a story of institutional evolution in which the historical performance of economies can only be understood as a part of a sequential story. Institutions provide the incentive structure of an economy; as that structure evolves, it shapes the direction of economic change towards growth, stagnation, or decline. In this essay, I intend to elaborate on the role of institutions in the performance of economies and illustrate my analysis from economic history.
Volume (Year): 5 (1991)
Issue (Month): 1 (Winter)
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- Posner, Richard A, 1980.
"A Theory of Primitive Society, with Special Reference to Law,"
Journal of Law and Economics,
University of Chicago Press, vol. 23(1), pages 1-53, April.
- Richard A. Posner, 1979. "A Theory of Primitive Society with Special Reference to Law," University of Chicago - George G. Stigler Center for Study of Economy and State 7, Chicago - Center for Study of Economy and State.
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- Curtin,Philip D., 1984. "Cross-Cultural Trade in World History," Cambridge Books, Cambridge University Press, number 9780521269315, August.
- Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
- Stiglitz, Joseph E, 1989. "Markets, Market Failures, and Development," American Economic Review, American Economic Association, vol. 79(2), pages 197-203, May.
- Douglass C. North, 1955. "Location Theory and Regional Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 63, pages 243-243. Full references (including those not matched with items on IDEAS)
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