Instituitions 101 #7

The picture is further complicated by North’s use of the different terms rule and constraint. North (1990, 1991, 1994) has written most often of formal and informal constraints,
rather than formal and informal rules, but he has not indicated why he dropped the word rule and whether or not constraints are also rules. North has written frequently of “formal rules” but not of “informal rules.” But some writers interpret North as making a distinction between formal and informal rules (e.g., Schout 1991). North’s (1994, 360) examples of “formal constraints” are “rules, laws, constitutions” and of “informal constraints” are “norms of behavior, conventions, self-imposed codes of conduct.” This suggests that rules are a special kind of formal constraint.

This creates a further problem for North. If all rules are formal, and institutions are essentially rules, then all institutions are formal. However, North (1995, 15) subsequently redefined institutions in the following terms: “Institutions are the constraints that human beings impose on human interactions.” By redefining institutions essentially as constraints, rather than rules, this raised the question of a possible distinction between formal and informal constraints. This 1995 definition of an institution neglects the enabling aspect of institutions by emphasizing constraints alone. North (1997, 6) then shifted back to a conception of institutions as “the rules of the game of a society.”

Hodgson (2006), ou a poesia na economia