Institutions affect economic development, and at the same time they are a way to measure it. Correlation and causality tangle up within a circular and cumulative process of changes, which draws the limits and possibilities for increased individual freedom. This essay brings together some key ideas that relate institutions to economic development and tries to link them in such a way as to offer the reader a refreshed view of classic themes. The complex and historically diverse relationship among firms, markets and the state is used as a short illustration of our attempt at providing an institutional reading on economic development.
institutions; development; economic development; institutional change; market failure