Institutions persist due to increasing returns and sunk informational costs.
North's 1990 argument. Institutions are costly to learn, so organisations invest in operating the existing ones and then have a stake in their persistence regardless of efficiency.
In practice
- A hospital keeps a paper form because forty processes learned around it, and the cost of relearning exceeds the cost of the form.
- A country keeps a tax code nobody would design, because every business has organised itself around its particular deductions.
- Subject
- Law & Politics
- Essay
- Competing accounts of how power works