What are informal institutions primarily characterized by?

Informal institutions are primarily characterized by norms, values, and ethics that are not codified. Unlike formal institutions, which rely on established laws and regulations, informal institutions shape behavior and expectations through cultural beliefs, social practices, and unwritten rules. These elements influence how individuals and organizations operate within a society, often guiding actions and decisions in ways that formal institutions cannot encapsulate.

The distinction lies in their flexibility and adaptability; informal institutions can evolve more rapidly than formalized laws, allowing them to reflect the changing dynamics of society, such as shifts in cultural attitudes or social consensus. For example, the way businesses are expected to interact with local communities may be guided largely by unwritten norms that reflect societal values rather than strictly legal requirements.

In contrast, formalized laws and regulations, economic contracts, and written documents represent structured frameworks that legally govern behavior but do not encompass the subtle and often powerful influence of society's underlying informal norms and ethics. These formal elements are essential for governance and operations but do not capture the full richness of how human interaction and community expectations function in practice.