The book presents the modern theory of institutions as they have been shaped in liberal democracies. Institutional theory uses the tools of economics as well as other social sciences and psychology to answer questions such as:
- what is the rule of law?
- why do economic and political power intertwine?
- how do small but powerful groups manage to impose their interests on the majority?
- which institutions are necessary for economic development?
- what are informal institutions?
- why is the Greek crisis mainly institutional?
- why does political ignorance and economic illiteracy lead to populism?

The book is also an introduction to the economic analysis of law, institutional economics, and public choice theory with extensive references to topics such as the Coase theorem, the problem of representation, Arrow's paradox of voting, the prisoner's dilemma, rent-seeking, and social capital.