ABSTRACT
This chapter analyzes the nature of the institution and dynamic mechanism of institutional change from the prospective of power. The institution is substantially a kind of distributive contract. Even bargaining mechanism in markets and negotiation mechanism on prices are also one of institutions since the beginning of social division of labor, or to be exact, the beginning of straddle trade. A dynamic equilibrium model that integrates institutional persistence and institutional change is brought out on the basis of power logic in this chapter. The institutional persistence and institutional change are both requirements for institutions themself. The persistence is determined by the functions of institution, while the change is from the essence of institutions. Institutional change cannot be explained by Pareto criterion and transaction cost because of the absence of distributivity and ambiguity of the concept of transaction cost in Coase Theorem.
