This book considers the nature, function, and evolution of economic and social institutions. Most simply, it is a first step in an attempt to liberate economics from its fixation on competitive markets as an all-encompassing institutional framework. It views economic problems as evolutionary ones in which economic agents have finite lives and pass on to their successors a wide variety of social rules of thumb, institutions, norms, and conventions that facilitate the coordination of economic and social activities. In time, the institutional structure of the economy becomes more and more complex as more and more social and economic institutions are created and passed on from generation to generation. In some instances these institutions supplement competitive markets, and in some instances they totally replace them. Some of the institutions are explicitly agreed to and codified into law; others are only tacitly agreed to and evolve spontaneously from the attempts of the individual agents to maximize their own utility. Some lead to optimal social states; others are dysfunctional. In any case, each arises for a specific reason. It is the purpose of this book to investigate these reasons and analyze the types of institutions that evolve.

But what are social institutions, and what functions do they serve? These questions can be answered only by viewing economic problems in an evolutionary light. Doing this, as Veblen (1898) points out, takes the emphasis away from equilibrium analysis and places it on the disequilibrium aspects of the economic process. The proper analogy to make is between the evolution of an economy and the evolution of a species.