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The author defines institutions as humanly devised constraints that provide structure to political, economic, and social interactions. The essay focuses on economic interactions and how institutions have impacted economic growth and development. According to the essay institutions create conditions that lead to lowering of costs, increase of profitability, and benefit in engaging in economic activity. The author shows the role of institutions in the performance of economies and shows an analysis from a historical perspective. Without institutions, cooperation is difficult. At the same time it takes resources to define and enforce exchange agreements. According to the author it is essential to have both political and economic institutions. What the author strives to show is that the evolution of political and economic institutions is responsible for increasing productivity.
The author refers to the history of development of institutions. These were essential to capture the gains from trade. The author gives a sequence of events that leads to the formation of institutions in a primitive society. He begins with exchange of hunting and gathering in a village. The author shows how trade spreads from village to village and ...
The write up gives a learned discussion on institutions as humanly devised constraints