The agent of change is the individual entrepreneur responding to the incentives embodied in the institutional framework. The sources of change are changing relative prices or preferences. The process of change is overwhelmingly an incremental one. I will put those separate elements together in this chapter.

Change typically consists of marginal adjustments to the complex of rules, norms, and enforcement that constitute the institutional framework. The overall stability of an institutional framework makes complex exchange possible across both time and space, and it will be useful to review the stability characteristics to improve our understanding of the nature of the incremental process of change.

Stability is accomplished by a complex set of constraints that include formal rules nested in a hierarchy, where each level is more costly to change than the previous one. They also include informal constraints, which are extensions, elaborations, and qualifications of rules and have tenacious survival ability because they have become part of habitual behavior. They allow people to go about the everyday process of making exchanges without having to think out exactly the terms of an exchange at each point and in each instance. Routines, customs, traditions, and conventions are words we use to note the persistence of informal constraints, and it is the complex interaction of formal rules and informal constraints, together with the way they are enforced, that shapes our daily living and directs us in the mundane (the very word conjures up images of institutional stability) activities that dominate our lives.