INTRODUCTION

Most social scientists agree that an understanding of institutions is critical for understanding economic development and the economic performance of economies. Yet, despite this recognition, the research on institutions by many social scientists is either highly descriptive or so abstract as to render it useless for policy. The reason for the absence of the “happy medium” is that few scholars know how to do empirical work in institutional economics. It is seldom taught in graduate school and the practitioners have learned by doing. It is our goal in collecting the essays in this volume to further the development of work in institutional analysis by drawing out some lessons on how to perform research.

HISTORY MATTERS

Institutions are historically specific, and for this reason it is necessary to be sensitive to historical context. This is particularly true for the dynamics of institutional change. Much of the developmental path of societies is conditioned by their past. Even after revolutions, institution builders do not start off in a historical vacuum. At any moment in time, actions are constrained by customs, norms, religious beliefs, and many other inherited institutions. This is as true for the leaders in Eastern Europe today as it was for Augustus Caesar.

An understanding of history is also important because the dynamics of institutional change frequently include unintended consequences that take on a life of their own.