ABSTRACT
This chapter introduces the concept of institutions and explains how institutions organize our lives, including the ways in which we invest in social capital, how we extract and convey socio-emotional goods (SEGs), and how we create attachment values. It considers three types of institution: those that describe human interactions and relationships, those that define human interactions and relationships, and those that connect causes and consequences of human interactions and relationships. Institutions help manage information, organize markets, reflect values, and distribute power and a host of other essential functions that allow people to exchange economically valued goods (EVGs), attachment-valued goods (AVGs), and SEGs. To perform these functions, one needs both formal and informal institutions. Institutions change for a variety of reasons including changing values, new information, efforts to redistribute power, and opportunities for improved efficiencies. Informal institutions may be replaced with formal ones when networks lack social capital or when large numbers of individuals are disadvantaged by the informal institution.
