Explore and Exploit: An Evolutionary Analysis of Institutional Dynamics

There is widespread support for the proposition that poor economic performance is fundamentally related to poor public policy (North, 1990; Mantzavinos, 2001; Easterly, 2001; Feng et al., 2000b). Oftentimes, bad policy is indeed good politics as extant institutional arrangements reward socially inefficient outcomes (Bueno de Mesquita et al., 2002). That is, policy-makers respond to incentives embedded in the institutional structure when choosing policies (Zak, 2002; Ghate and Zak, 2002). If it is institutions that fundamentally result in poverty, conflict, and other sources of human suffering, why are such institutions not changed?