Freeman Spogli Institute for International Studies Program on Energy and Sustainable Development Stanford University


Publications




Theory of Endogenous Institutional Change, A

Working Paper

Authors
Avner Greif - Stanford University
David Laitin - Stanford University

Issued by
CDDRL Working Papers, page(s): 58
August 2004


This paper asks (a) why and how institutions change; (b) how does an institution persist in a changing environment and (c) how do processes that it unleashes lead to its own demise. The paper shows that the game theoretic notion of self-enforcing equilibrium and the historical institutionalist focus on process are both inadequate to answer these questions. Building on a game theoretic foundation, but responding to the critique of it by historical institutionalists, the paper introduces the concepts of quasi-parameters and self--reinforcement. With these concepts, and building on repeated game theory, a dynamic approach to institutions is offered, one that can account for endogenous change (and stability) of institutions. Contextual accounts of formal governing institutions in early modern Europe and the informal institution of cleavage structure in the contemporary world provide illustrations of the approach.