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When Institutions Don’t Evolve - Coggle Diagram
When Institutions Don’t Evolve
Primitive exchange systems → fail to generate new institutions → economic stagnation
EXCHANGE SYSTEMS
→ Tribal society
→ Dense personal ties, informal norms
→ Innovation or deviance seen as threat to group survival
→ Order maintained through reputation and social pressure
→ Suq (bazaar) trade
→ Numerous small traders, face-to-face transactions
→ Lack of standardized prices, measures, or public information
→ Intense bargaining and “clientization” (repeat exchanges)
→ Profit depends on private information and negotiation skill
→ No formal legal system or enforcement → high transaction costs persist
→ Missing political institutions prevent voluntary organizations from emerging
→ Caravan trade
→ Protection via personal patronage or moral codes (e.g., tribal chiefs, baraka)
→ Payments (tolls, gifts) ensure safe passage
→ Protection is personal and moral, not institutional
→ Chiefs lack the coercive structure to enforce broad, impersonal property rights
→ Outcome
→ Stability without innovation
→ No transition to impersonal markets
→ High transaction costs block evolution toward modern economic systems