Informal Constraints (Ch. 5)
What are informal constraints, according to North?
Customs, traditions, moral codes, religious precepts, and social norms
What are formal constraints?
Constitutions, laws, regulations, and contracts
What is the most important source of stagnation in the Third World, according to North?
Inability to develop low-cost, effective enforcement of contracts and property rights.
Which two duelists illustrate the power of social norms over rational self-interest?
Alexander Hamilton and Aaron Burr.
What concept explains why institutions often persist even when inefficient?
Path dependence
Why do informal constraints change more slowly than formal ones
They are embedded in culture and passed down socially, creating path dependence
What is at the top of the hierarchy of formal rules?
What is a self-enforcing contract?
A contract where both parties have an incentive to comply without outside enforcement.
Among the Tonga of Zambia, why was giving gifts spontaneously considered an insult?
Because it violated established customs about when and how to give gifts.
What economic concept is directly tied to the effectiveness of institutions?
Transaction costs
Which California case did Robert Ellickson study to show how disputes were settled informally?
Ranchers in Shasta County resolving cattle trespass disputes without courts
Why are formal rules not necessarily efficient?
They are often created by those in power to serve their own interests.
Why is enforcement harder in impersonal exchange?
Parties are anonymous and may not interact again, so cheating is more tempting.
What enforcement mechanism did merchants sometimes use in history before courts?
Hostages or community ostracism.
Which game theory model explains why informal constraints can sustain cooperation?
The iterated prisoner’s dilemma
What anthropological example shows order maintained in stateless societies?
The Nuer of Sudan using the threat of feud as enforcement
What historical development enabled more complex formal rules?
The invention of writing.
What is the “fundamental dilemma of development”?
Societies need the state to enforce rules, but the state can also be the greatest violator.
What did North say about the U.S. Constitution being transplanted into Latin America?
It didn’t yield the same results because the underlying informal institutions differed.
What is the difference between self-enforcing agreements and third-party enforcement?
Self-enforcing agreements rely on incentives/reputation; third-party enforcement uses external authority
What are the three types of informal constraints North identifies?
Extensions of formal rules, socially sanctioned norms, and internally enforced codes of conduct
How do formal and informal rules interact?
Formal rules are more effective when aligned with informal norms; otherwise outcomes diverge.
What historical institution helped enforce contracts in long-distance trade before modern states?
The Law Merchant (merchant courts).
Which anthropologist studied the Tongans’ customs?
Elizabeth Colson.
What key idea from Chapter 7 explains why enforcement institutions become entrenched over time?
Increasing returns and adaptive expectations.