Introduction

The sources of external changes in techniques and structure that, if exploited, could lead to greater total income and certainly would lead to greater income for the action group that effected the exploitation were examined in Chapter 1. In addition, it was suggested in Chapter 2 that a change in the ‘rules of the political game’ can permit one person's (or group's) income to be increased at the expense of another's, if the former can find a way of taking advantage of (or perhaps even of initiating) the change. If these ‘increases in profits’ can be realized within the structure of existing institutional arrangements, few problems result and the desire for more income should lead to their exploitation within a relatively short period. In that case, present theory with its assumptions of a fixed institutional environment is adequate. If, however, the increased income cannot be realized within the existing arrangemental structure, existing theory is much less useful.

It is the possibility of profits that cannot be captured within the existing arrangemental structure that leads to the formation of new (or the mutation of old) institutional arrangements. To do no more than assert a relationship between income changes and arrangemental innovation is hardly a significant step; however, it is our intention to offer a theory that helps predict (or explain) the emergence of these new or mutated arrangements. In particular, the theory predicts the level (individual, voluntary cooperative, or governmental) of the new institutional arrangement and the length of time that passes between the recognition of the potential profit and the emergence of the new arrangement.