North (1994)

Management > Comparative Management > Lectures > Independent Research > North > Inefficient behaviour? > institutions/organisations > Learning > Rules

Rules

Low cost transacting works well if explained in Game theory terms. For example, when there are a small number of players, who repeatedly play the same game and each of whom know all the available options, can co-operate to benefit themselves. When there are a large number of players, the game is not repeated (or there is an endgame) and information is incomplete, co-operation is difficult to sustain.

When it comes to formal and informal rules, even though formal rules can be changed, informal rules will not change as quickly. They can, in fact, make new formal rules redundant, as it is norms that legitimise a set of rules.

This means that revolutionary change is rarely as revolutionary as many CEOs wish. This also explains the often failure of the adoption of another's economy.