Douglass North argues that understanding how institutions evolve is essential for effective policymaking and designing new institutions. Neoclassical economic theories are insufficient to explain differences in societal and economic performance over time, as institutions determine the incentives and payoffs that influence individual choices. Institutions consist of both formal rules and informal norms that structure human interaction. They evolve incrementally as entrepreneurs perceive new opportunities from external changes or knowledge acquisition, and induce changes that benefit their organizations. Revolutionary change occurs when conflicting groups lack mediating institutions to negotiate compromises.

1. ON INSTITUTIONAL INNOVATION DOUGLASS NORTH

23. INCREMENTAL INSTITUTIONAL CHANGE

24. INSTITUTIONAL CHANGE AGENTS, SOURCES, PROCESS AND DIRECTION

37. INSTITUTIONAL POLITY CHANGE ALTER THE RULES BY WHICH OTHER RULES ARE MADE

45. REVOLUTIONARY INSTITUTIONAL CHANGE

51. THE IMPICATIONS OF AN INSTITUTIONAL FRAMEWORK