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A Theory of Endogenous Institutional Change

Published online by Cambridge University Press:  01 November 2004

AVNER GREIF  and
DAVID D. LAITIN
AVNER GREIF
Affiliation:
Stanford University
DAVID D. LAITIN
Affiliation:
Stanford University
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Abstract

This paper asks (a) why and how institutions change, (b) how an institution persists in a changing environment, and (c) how 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.

Type
ARTICLES
Information
American Political Science Review , Volume 98 , Issue 4 , November 2004 , pp. 633 - 652
Copyright
© 2004 by the American Political Science Association

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