Robert Donnelly IS 816 Review Essay Week 6 6 February 2005 Institutions, Institutional Change and Economic Performance by Douglass C. North Cambridge University Press, 1990 1. Summary of the major arguments North begins his book by stating that “institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction.”(3) That being said North then proposes to examine institutions, changes in them, and their impact on economic performance over time. He has divided the book into three parts. Part I is the examination of the nature of institutions and their manifestations for economic performance. From there, Part II outlines the theory of institutional change and how it explains how past behaviors influence present and future behaviors. It also explores the impact of incremental changes within institutions and its effect on the nature of path dependence. Part III is the primary objective of the North’s work. It is to understand the differential performances of various economies through time. The author is careful to make the distinction between institutions and organizations. Both are components of the structural framework that supports human interaction but they are not the same. As stated previously, institutions can be considered the rules of the game and organizations can be considered the players. The purpose of the rules is to define the way that the game is played. Organizations are groups of individuals who work toward a common goal or objective and have common interests. Political parties, churches, schools, unions, or government agencies are some examples of organizations. The book considers organizations primarily as the agent for institutional change with emphasis on the interaction between the rules (institutions) and the players (organizations). North contends that any theory on institutions