The Oxford English Dictionary defines institution to be “an established law, custom, usage, practice, organization, or other element in the political or social life of a people”. The present chapter unravels their lead, but recasts the concept so as to stress the role of institutions in economic life.202

By institutions we mean, very loosely, the arrangements that govern collective undertakings. Those arrangements include not only legal entities like the modern firm, but also insurance institutions within village networks, such as the iddir in Ethiopia and variants elsewhere in sub-Saharan Africa (Box 6.4). They include bazaars in the Middle East, village networks for saving and credit in Asia and Latin America, the nuclear household in the West, the extended kinship system of claims and obligations in Africa, and elaborate authority structures such as the Mafia. And they include that overarching entity called government that exists everywhere in the modern world.