Institutions, Institutional Change and Economic Performance

In this book, Douglass C. North presents a general theory about institutions, emphasizing that they are the humanly devised constraints that structure political, economic, and social interaction.

He distinguishes between formal institutions (laws, constitutions, property rights) and informal institutions (traditions, customs, codes of conduct).

North argues that institutions determine the rules of the game, influencing what knowledge is worth acquiring, what activities are profitable, and how individuals relate to each other.

He also discusses how institutions evolve incrementally, sometimes undergoing sudden changes due to factors like war, revolution, or technological advancements.

The book highlights the concept of 'path dependence' and the role of institutions in shaping long-run economic performance, challenging traditional neoclassical economic theories.