When do (in)formal institutions matter?

Institutions are commonly defined as “formal rules and informal norms,” but when does one form dominate the other? I’m sure that everyone will have a casual view of informal (formal) norms being more important in smaller (larger) groups, but where is the dividing line?

While discussing this topic, I hit upon the Dunbar number as the separating concept, i.e., a suggested cognitive limit to the number of people with whom one can maintain stable social relationships—relationships in which an individual knows who each person is and how each person relates to every other person.

Thus, the following figure, showing  where informal norms and formal rules are more efficient than each other:

 

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Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

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