He was accepted at Harvard at the same time that his father became the head of MetLife on the West Coast, so North chose instead to attend the University of California, Berkeley.

[4] A conscientious objector in World War II, North became a navigator in the Merchant Marine, traveling between San Francisco and Australia.

He taught navigation at the Maritime Service Officers' School in Alameda during the last year of the war, and struggled with the decision of whether to become a photographer or an economist.

[10] Along with Ronald Coase and Oliver Williamson, he helped found the International Society for the New Institutional Economics (ISNIE)[11] which held its first meeting in St. Louis in 1997.

Constraints, as North describes, are devised as formal rules (constitutions, laws, property rights) and informal restraints (sanctions, taboos, customs, traditions, codes of conduct), which usually contribute to the perpetuation of order and safety within a market or society.

The degree to which they are effective is subject to varying circumstances, such as a government's limited coercive force, a lack of organized state, or the presence of strong religious precept.

In this setting, specialization "is rudimentary and self-sufficiency characterizes most individual households", with small-scale village trade existing within dense social networks of informal constraints that facilitate local exchange, and a relatively low transaction cost.

In this close-knit network "people have an intimate understanding of each other, and the threat of violence is a continuous force for preserving order ..."[2] With growth, the market extends beyond the village into larger, interconnected regions.

[2] As long-distance trade becomes more feasible, generally through caravans or lengthy ship voyages, individuals and groups experience occupational and geographic specialization.

For this reason, sedentary merchants often would send their kin with the product to ensure its safe arrival and the fulfillment of agreed terms of exchange by the receiving party.

However, in modern societies, institutions acting cooperatively in the interest of free market trade provide protection for goods and enforcement of contracts.

This final stage of development specialization requires increasing percentages of the resources of the society to be active in the market so that the transaction sector becomes a large share of gross national product.

Globalized specialization and division of labor demand institutions to ensure property rights even when trading in neighboring countries enabling capital markets to develop "with credible commitment on the part of the players.

[13] Importantly for North, individuals and organizations make their decisions on the basis of imperfect ideologies, which are "mental models" for how the world functions.

First, the powerful actors in control of the political systems made the institutions for their benefit and so will be reluctant to change them, resulting in path dependence.

[14] The first set of institutions are called "limited access orders," and they are characterized by elite control of the political and economic systems to extract rents.

The second set of institutions that North et al. propose are called "open access orders," and they limit violence through a politically controlled military.

These societies allow anyone who meets some impersonal criteria to form political and economic organizations, resulting in a Schumpeterian process of "creative destruction."

North's research in New Economic History has included such notable economists and historians as Jonathan Hughes, Richard Sutch, Lloyd Mercer, Jim Sheperd, Donald Gordon, Gary Walton, Lance E. Davis, Robert Huttenback, Roger Ransom, Gaston Rimlinger, Terry L. Anderson, P.J.