If the role of transaction costs in the choice of an institutional arrangement is granted , transaction costs can also be used to explain institutional changes. Given the level of a demanded institutional service, an arrangement is more efficient than other available options if it requires less total transaction costs than the other arrangements in the choice set (north 1984) . starting from an institutional equilibrium ,a disequilibrium may result from exogenous shocks in ; 1 the demand for institutional services . 2. The technologies related to transaction costs ; and /or 3. The choice set of available institutional arrangements. Regardless of source , any such shock could render an existing institutional arrangement less efficient than one or more other arrangements in the choice set