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By Charles N Moore

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By pushing out geographical frontiers, specialization and division enhance the extent of exchange. However, specialization and division of labor also increase transaction costs. It is then essential to develop and enforce institutional structures that enable individuals to take actions involving complex relationships with other individuals far removed from personal knowledge and extending over long periods of time. l From an individual standpoint, rules yield a flow of benefits. The source of those benefits is the predictability of other people's behavior.

624-87. 3 North. D. Institutions. Institutional Changes and Economic performance" Cambridge: Cambridge University press. 1990, p. 101. 33 CHANGES IN INSTITUTIONS Friedrich Hayek generalized the history and development of institutions into the French or rationalistic tradition and the British or empirical tradition. The French tradition had two tenets: that there exists a "just" society in which people can live in peace and harmony, and that human reason is capable of discovering the institutions required to bring about such a society.

An imillication of our analysis is that the efficiency of the common law precedents is merely a tendency. 1 Priest, R. "The Common Law Process and the Selection of Efficient Rules," Journal of Legal Studies, 6, 1977, p. 72. Other pioneering studies on why the common law is efficient are: Cooter, R. and, Kornhauser, L. "Can Litigation Improve the Law Without the Help of Judges," Journal of Legal Studies, 9, 1980; Goodman, J. "An Economic Theory of the Evolution of the Common Law," Journal of Legal Studies, 7, 1978; Rubin, P.

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