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The "Reality" of Political/Economic Systems

"The 'reality' of a political/economic system is never known to anyone, but human beings do construct elaborate beliefs about the nature of that “reality” — beliefs that are both a positive model of the way the system works and a normative model of how it should work. The belief system may be broadly held within a society; alternatively, widely disparate beliefs may be held. The dominant beliefs — that is, of those political and economic entrepreneurs in a position to make policies--over time result in the accretion of an elaborate structure of institutions--both formal rules and informal norms--that determine economic and political performance. At any moment of time this institutional matrix imposes severe constraints on the choice set of entrepreneurs seeking to improve their political or economic positions. The resultant path dependence typically makes change incremental. But change is continually occurring (although the rate will depend on the degree of competition among organizations and their entrepreneurs), resulting in alterations of the institutional matrix, revisions of perceptions of reality, and therefore new efforts of entrepreneurs to improve their position in a never-ending process of change. Change can also result from non-human-induced changes in the environment, such as natural disasters; but overwhelmingly it is humans themselves who incrementally alter the human landscape."

-"Order, Disorder and Economic Change: Latin America vs. North America" North, Summerhill, and Weingast (1999, 7)

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