Obstacles to the Effective Institutional Choice: Why Do Economicall y Expedient Institutions Not Always Get Implemented

Teodor Sedlarski

Yearbook of the Faculty of Economics and Business Administration, Sofia University, 2011, vol. 9, issue 1, 205-229

Abstract: This article examines the theoretical arguments in D. North’s theory of institutional change for why effective social rules and norms do not always succeed to replace economically inexpedient ones. An institutional development path which clearly diverts from the notion of evolution toward a more effective set of rules is seen as the main reason for the unequal economic performance of nations. Path dependence, informal norms which contradict better reglamentation of social and economic processes as well inefficiencies in the political markets hinder the efficient institutional choice. In-depth understanding of the above factors can become the basis for a more sophisticated macroeconomic policy aimed at increased economic growth, especially in transition societies.

Keywords: institutions; transaction costs; path dependence; institutional choice. (search for similar items in EconPapers)
JEL-codes: B52 O43 (search for similar items in EconPapers)
Date: 2011
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