Contracting Boundaries as Institutional Infrastructure: Efficacy, Adaptation, and Obsolescence: Commentary on La Croix and Ghiselin's Comments

The New Institutional Economics (NIE) emphasizes that different governance structures generate a rich variety of observed institutional arrangements. In Yarbrough & Yarbrough (1999), we extended this reasoning to argue that different governance structures also carry implications for the sets of acceptable contracting partners or ‘insiders’. Here we discuss various contracting groups as institutional infrastructures and evaluate their efficiency, ability to adapt, and longevity or possible obsolescence in the face of changes in the nature of transactions or of the transactional environment. The fact that, despite their many shortcomings, private institutional infrastructures continue to be built, to adapt, and to function, even in modern societies with well-developed state-based legal systems, provides a measure of the centrality and complexity of the task of assuring contractual integrity. Copyright Kluwer Academic Publishers 2000