Competition among Institutions: Evolution within Constraints

Competition among institutions is a wide topic with many different aspects and problems to discuss. The purpose of this paper is to outline an evolutionary approach to the process of competition among institutions. For a more thorough analysis we will draw a parallel between ordinary market competition and the subject of our interest, competition in the realm of institutions. We shall focus, in particular, on two issues. First, the role of the competitive process as a knowledge-creating process. In this respect, we will show that institutional competition leads to the creation and spreading of new institutions. Secondly, we ask what inferences, if any, can be drawn from the nature of this process of competition among institutions to the desirability of its outcomes. Here we will argue that in the same way that competition on ordinary markets has to take place under certain rules, which ensure the desirability of these competitive processes, competition among institutions also requires a framework of rules channelling the competitive processes into desirable directions. Before we begin our discussion on these issues, however, some clarifying comments are in order to narrow down what we mean by ‘evolutionary approach’ and ‘competition among institutions’.