•  The economies of scope, complementarities, and network externalities of an institutional matrix make institutional change overwhelmingly incremental and path dependent. Given the interactive nature of both institutions and organizations, we focus more narrowly in this lecture on institutions - as formal rules, legal infrastructure, informal constraints, and enforcement mechanisms that constrain or shape behaviour in the process of market-based economic transformation.
Such institutions help to transmit information to economic agents, enforce property rights and contracts, manage competition in all markets and shape the allocative efficiency of the state. A market economy framework requires a different legal-institutional system than a non-market economy.