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Introduction

Economic interactions between individuals take place within institutions which can be defined either as informal constraints (sanctions, customs, taboos, traditions and codes of conduct) or as formal rules (constitutions, laws, property rights) (North, 1991).

Social norms or general norms can be defined as the broader set of rules including informal constraints and formal rules. Therefore, the set of general norms can be delineated by the nature of agree­ments among individuals. A basic distinction is thus possible between conventions, which are tacit rules, and institutions, which result solely from an explicit and formal agreement among individuals. Customs belong to the first subset of general social norms, defined as informal and tacitly agreed rules. Using economic tools, we shall define customs and show how their properties are those of conventional norms. Then, we shall study the bound­aries within which they are supposed to be obeyed. Finally, we shall examine the conditions under which customs ground legal rules and compare them to other sources of the law.

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Source: Backhaus Jürgen G. (ed.). The Elgar Companion to Law And Economics. Second Edition. Edward Elgar,2005. – 777 p.2. 2005
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