Defining institutions

Institutions are the formal and informal rules and norms that organise social, political and economic relations (North, 1990). They are not the same as organisations. Key features of institutions are:

  • They are brought to life by people and organisations (North, 1990; Leftwich & Sen, 2010).
  • They provide a relatively predictable structure for everyday social, economic and political life. Institutions shape people’s incentives (or calculations of returns from their actions) and behaviour. They establish a predictable, though not necessarily efficient or uncontested structure for human interaction (North, 1990: 6). Some argue institutions shape but do not necessarily always determine behaviour (Leftwich & Sen, 2010: 9).
  • They lead to enduring patterns of behaviour over time but they also change. Institutions are constantly being reformed through people’s actions (Giddens, 1984). Institutional change structures the way societies evolve (North, 1990: 3). However, institutionalised behaviours can be hard to change.
  • They produce positive or negative development outcomes. This depends on the kinds of relations and behaviours that institutions enable, and the outcomes for the enjoyment of rights and allocation of resources in society (Leftwich & Sen, 2010).

Institutions and organisations

Institutions are ‘the underlying rules of the game’. Organisations are ‘groups of individuals bound by a common purpose’. Organisations are shaped by institutions and, in turn, influence how institutions change. Some social scientists view organisations as the material expressions of institutions. Some see social groups such as government bodies, tribes and families as institutions. Some identify ‘primary’ or ‘meta’ institutions to be the family, government, economy, education and religion.

Sources: North, 1990: 3, 5; Harper et al., 2012: 15.

Institutions are both formal and informal. Formal institutions include the written constitution, laws, policies, rights and regulations enforced by official authorities. Informal institutions are (the usually unwritten) social norms, customs or traditions that shape thought and behaviour (Leftwich & Sen, 2010; Berman, 2013). Development practitioners have tended to prioritise formal institutions, viewing informal ones as separate and often detrimental to development outcomes (Unsworth, 2010).

In practice, formal and informal rules and norms can be complementary, competing or overlapping (Jütting et al., 2007: 36; Leftwich & Sen, 2010: 17). Whether they are relatively more strong/weak or inclusive/discriminatory is likely to depend on context (Unsworth, 2010). In some cases, informal institutions undermine formal ones; in others they substitute for them (Leftwich & Sen, 2010: 17; Jütting et al., 2007: 35-36). Informal social norms often shape the design and implementation of formal state institutions (Migdal, 2001; Jütting et al., 2007: 7).

Leading sources on institutions

  • Institutions aren’t necessarily efficient because people may not always have perfect information about the incentives or actions of others.
  • Institutions aren’t necessarily efficient because people may not always have perfect information about the incentives or actions of others.
  • Berman, S. (2013). Ideational theorizing in the social sciences since ‘Policy paradigms, social learning and the state’. Governance, 26(2), 217-237. See document online
  • DFID (2003a). Promoting institutional appraisal and development. Guidelines for DFID. London: Department for International Development. See document online
  • Giddens (1984). The constitution of society: Outline of the theory of structuration. Berkeley: University of California Press. See document online
  • Harper, C., Jones, N. & Watson, C. (2012). Gender justice for adolescent girls: tackling social institutions. Towards a conceptual framework. London: Overseas Development Institute. See document online
  • Helmke, G. & Levitsky, S. (2004). Informal institutions and comparative politics: A research agenda. Perspectives on Politics, 2(4), 725-740. See document online
  • Jütting, J., Drechsler D., Bartsch, S. & de Soysa, I. (eds.) (2007). Informal institutions: How social norms help or hinder development. Paris: OECD. See document online
  • Leftwich, A. & Sen, K. (2010). Beyond institutions: Institutions and organizations in the politics and economics of poverty reduction – Thematic synthesis of research evidence. DFID-funded Research Programme Consortium on Improving Institutions for Pro-Poor Growth (IPPG). Manchester: University of Manchester. See document online
  • Migdal, J. S. (2001). State in society: Studying how states and societies transform and constitute each other. New York: Cambridge University Press. See document online
  • North, D. (1990). Institutions, institutional change, and economic performance. New York: Cambridge University Press. See document online
  • Unsworth, S. (2010). An upside down view of governance. Brighton: Institute of Development Studies. See document online
  • Institutions aren’t necessarily efficient because people may not always have perfect information about the incentives or actions of others.