Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Institutions
Journal of Economic Perspectives
vol. 5,
no. 1, Winter 1991
(pp. 97–112)
(Complimentary)
Abstract
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.Citation
North, Douglass C. 1991. "Institutions." Journal of Economic Perspectives, 5 (1): 97–112. DOI: 10.1257/jep.5.1.97JEL Classification
- D00 Microeconomics: General
- D70 Analysis of Collective Decision-Making: General
- D23 Organizational Behavior; Transaction Costs; Property Rights
There are no comments for this article.
Login to Comment