In this book, Douglass North offers a general theory of the process of economic change. His perspective is, of course, the New Institutional Economics, and the book draws on a wide range of earlier work by himself and others working in this tradition. The book is breathtaking in its scope, covering the whole of human history, drawing not just on economics, politics, anthropology and other social sciences, but on psychology and biology. It is a comprehensive account of human history, rooted in analyses of individual and social behaviour that would have been inconceivable a generation ago, perhaps even less than that.

North offers a summary of his thesis that is sufficiently succinct to be worth quoting in full:“The keys to the story are the ways beliefs are altered by feedback from changed perceived reality as a consequence of the policies enacted, the adaptive efficiency of the institutional matrix–how responsive is it to alteration when outcomes deviate from intentions–and the limitations of changes in the formal rules as correctives to perceived failures”(p. 4).