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07/10/2018 Institution - Wikipedia

Theories of institutional change

In order to understand why some institutions persist and other institutions only appear in certain contexts, it is important
to understand what drives institutional change. Acemoglu, Johnson and Robinson assert that institutional change is
endogenous. They posit a framework for institutional change that is rooted in the distribution of resources across society
and preexisting political institutions. These two factors determine de jure and de facto political power, respectively, which
in turn defines this period's economic institutions and next period's political institutions. Finally, the current economic
institutions determine next period's distribution of resources and the cycle repeats.[26] Douglass North attributes
institutional change to the work of "political entrepreneurs", who see personal opportunities to be derived from a change
institutional framework. These entrepreneurs weigh the expected costs of altering the institutional framework against the
benefits they can derive from the change.[27] North describes institutional change as a process that is extremely
incremental, and that works through both formal and informal institutions. Lipscy argues that patterns of institutional
change vary according to underlying characteristics of issue areas, such as network effects.[28]

Institutional persistence
North argues that because of the preexisting influence that existing organizations have over the existing framework,
change that is brought about is often in the interests of these organizations. This produces a phenomenon called path
dependence, which states that institutional patterns are persistent and endure over time.[29] These paths are determined at
critical junctures, analogous to a fork in the road, whose outcome leads to a narrowing of possible future outcomes. Once a
choice is made during a critical juncture, it becomes progressively difficult to return to the initial point where the choice
was made. James Mahoney studies path dependence in the context of national regime change in Central America and
finds that liberal policy choices of Central American leaders in the 19th century was the critical juncture that led to the
divergent levels of development that we see in these countries today.[30] The policy choices that leaders made in the
context of liberal reform policy led to a variety of self-reinforcing institutions that created divergent development
outcomes for the Central American countries.

Though institutions are persistent, North states that paths can change course when external forces weaken the power of an
existing organization. This allows other entrepreneurs to affect change in the institutional framework. This change can
also occur as a result of gridlock between political actors produced by a lack of mediating institutions and an inability to
reach a bargain.[31] Artificial implementation of institutional change has been tested in political development but can have
unintended consequences. North, Wallis, and Weingast divide societies into different social orders: open access orders,
which about a dozen developed countries fall into today, and limited access orders, which accounts for the rest of the
countries. Open access orders and limited access orders differ fundamentally in the way power and influence is
distributed. As a result, open access institutions placed in limited access orders face limited success and are often coopted
by the powerful elite for self-enrichment. Transition to more democratic institutions is not created simply by transplanting
these institutions into new contexts, but happens when it is in the interest of the dominant coalition to widen access.[32]

Natural selection
Ian Lustick suggests that the social sciences, particularly those with the institution as a central concept, can benefit by
applying the concept of natural selection to the study of how institutions change over time.[33] By viewing institutions as
existing within a fitness landscape, Lustick argues that the gradual improvements typical of many institutions can be seen
as analogous to hill-climbing within one of these fitness landscapes. This can eventually lead to institutions becoming
stuck on local maxima, such that for the institution to improve any further, it would first need to decrease its overall
fitness score (e.g., adopt policies that may cause short-term harm to the institution's members). The tendency to get stuck
on local maxima can explain why certain types of institutions may continue to have policies that are harmful to its
members or to the institution itself, even when members and leadership are all aware of the faults of these policies. 5/9