Edited by Theodore Eisenberg and Giovanni B. Ramello
Chapter 5: Principles, tolerance and institutional torpor
Institutions play a decisive role in determining economic behaviour: they influence individual preferences, they affect the intensity and the goals of cooperation and, more generally, they explain a great deal about the prosperity of a community. Economic historians and economists have devoted considerable attention to the features of the institutional environment, generally regarded as a system of incentives to which individuals respond, frequently influenced by habits, traditions, and moral standards. Nonetheless, conceiving how the existing laws evolve has often turned out to be an elusive exercise. To be fair, the public choice school and the so-called new institutional approach have persuasively illustrated that the different concentrations of costs and benefits ensure that pieces of legislation are approved and upheld even when the public at large considers them undesirable, and that such pieces of legislation are likely to trigger self-perpetuating processes. Still, it is also true that objectionable institutional frameworks frequently fail to elicit much opposition, and are tolerated even when a community is offered a chance to vote against them.
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