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Cited by 24,871

The DOI matches its Crossref record.

Institutions, Institutional Change and Economic Performance

Munger, Michael C., North, Douglass C.·1991·Southern Economic Journal
DOI 10.2307/1060065
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Abstract

Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)

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Metadata

Authors
Munger, M. C., & North, D. C.
Venue
Southern Economic Journal
Publisher
JSTOR
Published
1991-07
Volume
58
Issue
1
Pages
296
ISSN
0038-4038 (ISSN-L)
DOI
10.2307/1060065
OpenAlex
W3121147769
Cited by
24,871
References
0
FWCI
237.19
Type
journal article
Language
en
Open access
closed

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