The application of Douglass North's approach to institutional change in Transition economies

Abstract

New institutional economics stresses the importance of formal and informal institutions to promote the economics development. This paper focuses on the basic concepts of Douglass North's theory about institutional change. It tries to discover whether his concepts of formal and informal institutions, organizations, transation costs, ideologies, path dependence, and adaptive efficiency are applicable to institutional change in post-communist transition economies. This paper also develops further North's approach to institutional change, talking into consideration short-run and middle-run influencing factors, as well as exogenous ones. Only then may North's approach serve as a pattern for analyzing transition economies.