institutions

Institutions are long-standing patterns of behavior and the formal organizations and informal norms that guide social interaction. They shape what is possible, what is expected, and what is permissible, and they persist beyond the lifetimes of individual actors. Institutions consist of formal rules such as laws, constitutions, and regulations, and informal norms such as customs, conventions, and shared scripts.

They can be categorized as formal or informal, and as organizations or social practices. Formal institutions include governments, courts, educational systems, financial systems, property rights regimes, and corporate firms. Informal institutions include family structures, religious traditions, social conventions, and cultural beliefs. Hybrid forms combine elements of both and can appear in governance arrangements, standards, and public-private partnerships.

Institutions provide coordination and reduce uncertainty by establishing expectations, reducing transaction costs, and facilitating cooperation. They allocate rights and duties, determine access to resources, and enable conflict resolution. At the same time, they can constrain behavior, create barriers to entry, or entrench inequalities, especially when rules reflect the interests of powerful groups.

Institutions evolve through reform, innovation, economic change, and external shocks. Path dependence and legitimacy influence how readily they change. Studying institutions helps explain economic development, political stability, and social welfare. Critics note that institutions can be captured by elites or biased against marginalized communities, prompting reforms aimed at improving efficiency, accountability, and inclusivity.