Institution

An institution is a humanly devised structure of rules and norms that shape and constrain social behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions and norms are all examples of institutions. Institutions vary in their level of formality and informality. Institutions embody a great deal of knowledge of how to do things in society and have been described as the social science equivalent of theories in the natural sciences.

Institutions are a principal object of study in social sciences such as political science, anthropology, economics, and sociology (the latter described by Émile Durkheim as the "science of institutions, their genesis and their functioning"). Primary or meta-institutions are institutions such as the family or money that are broad enough to encompass sets of related institutions. Institutions are also a central concern for law, the formal mechanism for political rule-making and enforcement. Historians study and document the founding, growth, decay and development of institutions as part of political, economic and cultural history.

There are a variety of definitions of the term institution. These definitions entail varying levels of formality and organizational complexity. The most expansive definitions may include informal but regularized practices, such as handshakes, whereas the most narrow definitions may only include institutions that are highly formalized (e.g. have specified laws, rules and complex organizational structures).

According to Wolfgang Streeck and Kathleen Thelen, institutions are, in the most general sense, "building blocks of social order: they represent socially sanctioned, that is, collectively enforced expectations with respect to the behavior of specific categories of actors or to the performance of certain activities. Typically, they involve mutually related rights and obligations for actors." Sociologists and anthropologists have expansive definitions of institutions that include informal institutions. Political scientists have sometimes defined institutions in more formal ways where third parties must reliably and predictably enforce the rules governing the transactions of first and second parties.

One prominent Rational Choice Institutionalist definition of institutions is provided by Jack Knight who defines institutions as entailing "a set of rules that structure social interactions in particular ways" and that "knowledge of these rules must be shared by the members of the relevant community or society." Definitions by Knight and Randall Calvert exclude purely private idiosyncrasies and conventions.

Douglass North argues that institutions are "humanly devised constraints that shape interaction". According to North, they are critical determinants of economic performance, having profound effects on the costs of exchange and production. He emphasizes that small historical and cultural features can drastically change the nature of an institution. Daron Acemoglu, Simon Johnson, and James A. Robinson agree with the analysis presented by North. They write that institutions play a crucial role in the trajectory of economic growth because economic institutions shape the opportunities and constraints of investment. Economic incentives also shape political behavior, as certain groups receive more advantages from economic outcomes than others, which allow them to gain political control. A separate paper by Acemoglu, Robinson, and Francisco A. Gallego details the relationships between institutions, human capital, and economic development. They argue that institutions set an equal playing field for competition, making institutional strength a key factor in economic growth. Authors Steven Levitsky and María Victoria Murillo claim that institutional strength depends on two factors: stability and enforcement. An unstable, unenforced institution is one where weak rules are ignored and actors are unable to make expectations based on their behavior. In a weak institution, actors cannot depend on one another to act according to the rules, which creates barriers to collective action and collaboration. Increased democracy can lead to more inclusive institutions.

Other social scientists have examined the concept of institutional lock-in. In an article entitled "Clio and the Economics of QWERTY" (1985), economist Paul A. David describes technological lock-in as the process by which a specific technology dominates the market, even when the technology is not the most efficient of the ones available. He proceeds to explain that lock-in is a result of path-dependence, where the early choice of technology in a market forces other actors to choose that technology regardless of their natural preferences, causing that technology to "lock-in". Economist W. Brian Arthur applied David's theories to institutions. As with a technology, institutions (in the form of law, policy, social regulations, or otherwise) can become locked into a society, which in turn can shape social or economic development. Arthur notes that although institutional lock-in can be predictable, it is often difficult to change once it is locked-in because of its deep roots in social and economic frameworks.

Randall Calvert defines institution as "an equilibrium of behavior in an underlying game." This means that "it must be rational for nearly every individual to almost always adhere to the behavior prescriptions of the institution, given that nearly all other individuals are doing so."