Short answers, pulled from the story.
An institution is a humanly devised structure of rules and norms that shape and constrain social behavior. Definitions vary by discipline, but all generally require some level of persistence and continuity, and examples range from laws and formal organizations to informal social conventions and norms.
Douglass North defined institutions as "humanly devised constraints that shape interaction." North argued they are critical determinants of economic performance, affecting the costs of exchange and production, and that small historical and cultural features can drastically change the nature of a given institution.
Institutional lock-in describes the process by which a rule, law, or social arrangement becomes so embedded in social and economic frameworks that it is very difficult to change, even when alternatives exist. Economist Paul A. David introduced the concept in a 1985 article titled "Clio and the Economics of QWERTY," and W. Brian Arthur extended it from technology to institutions.
According to Daron Acemoglu, good institutions have three key characteristics: enforcement of property rights, constraints on the actions of elites, and equal opportunity for broad segments of society. The World Bank's Worldwide Governance Indicators, introduced in 1999, were designed to measure these dimensions.
Path dependence is the idea that choices made at critical junctures in an institution's history narrow the range of possible future outcomes, making it progressively harder to return to the original decision point. James Mahoney studied this in the context of Central America, finding that liberal policy choices by 19th-century leaders produced the divergent development levels seen in those countries today.
Ian Lustick argued that institutions exist within a fitness landscape and that gradual improvement is analogous to hill-climbing. Institutions can become stuck on local maxima, where further improvement requires short-term harm before long-term gains emerge. He used Amyx's analysis of Japan's Lost Decade as his primary example, where experts knew the needed fixes but could not enact them without imposing short-term costs.