Protocols and Institutions

This paper is a pre-print of a book chapter that explores the relationship between protocols and institutions through the lens of control systems engineering. Cross-referencing concepts from Institutional Economics, Cybernetics, Control Theory, and Market Design, we define institutions mathematically through correspondence to stability (in the sense of Lyapunov), demonstrating that behavior can be enduringly and predictably patterned without resorting to coercive control. Grounded in engineering practice, we emphasize field surveys as prerequisites for formal modeling, avoiding purely theoretical constructs. Aligning our terminology with control engineering’s canonical forms enables us to direct readers to a broad suite of practical methods, while highlighting emerging work on institutional design through protocolization. The chapter will appear in Web3 Blockchain Economic Theory, edited by Melanie Swan, Soichiro Takagi, and Frank Witte.