Continuing his groundbreaking analysis of economic structures, Douglass North here develops an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time. Institutions exist, he argues, due to the uncertainties involved in human interaction; they are the constraints devised to structure that interaction. Yet institutions vary widely in their consequences for economic performance; some economies develop institutions that produce growth and development, while other economies develop institutions that produce stagnation.

Part I. Institutions: 1. An introduction to institutions and institutional change; 2. Cooperation: the theoretical problem; 3. The behavioural assumptions in a theory of institutions; 4. A transaction cost theory of exchange; 5. Informal constraints; 6. Formal constraints; 7. Enforcement; 8. Institutions and transaction and transformation costs; Part II. Institutional Change: 9. Organizations, learning, and institutional change; 10. Stability and institutional change; 11. The path of institutional change; Part III. Economic Performance: 12. Institutions, economic theory, and economic performance; 13. Stablity and change in economic history; 14. Incorporating institutional analysis into economic history: prospects and puzzles.