ABSTRACT
Institutions are rules of human conduct whose violations attract sanctions of some sort. Appropriate institutions can help people with limited cognition to make sense of the complex and evolving reality, in other words help to ease the knowledge problem. Any institution can only have a normative effect on human behaviour if it remains reasonably stable over time. Changing circumstances that impact on individuals typically elicit experimentation with alternative institutional arrangements. Some may spontaneously try out new arrangements that breach old rules, even possibly accepting reprimands. If the slow-growing European economies are to achieve any reform, constitutional changes must occur in external and internal institutions. There is considerable inertia in many rule systems that have, after all, been practiced since Palaeolithic times. Inertia in institutions leads to tensions in society and to inter-generational conflicts. It may even lead to cultural and economic decline and civil war.
