The book presents the modern theory of institutions as they have developed in liberal democracies. Institutional theory employs the tools of economic science, as well as other social sciences and psychology, to answer questions such as:

• What is the rule of law?
• How are economic and political power intertwined?
• How do small but powerful groups manage to impose their interests on the majority?
• What institutions are necessary for economic development?
• What are informal institutions?
• Why is the Greek crisis primarily institutional?
• Why do political ignorance and economic illiteracy lead to populism?

The book also serves as an introduction to the economic analysis of law, institutional economics, and public choice theory with extensive references to topics such as the Coase theorem, the problem of representation, Arrow's voting paradox, the prisoner's dilemma, rent-seeking, and social capital.

The SMALL INTRODUCTIONS series includes reference books, written by experts, that provide accurate and in-depth information on issues of immediate interest. Simple yet not simplistic, scientific but not inaccessible, brief yet comprehensive, the series offers the modern reader the keys to deeply understand our complex and changing world.

The series is directed by Babis Papadimitriou.