It is generally accepted that existing differences in economics, politics and society reflect the influence of different institutions. But among economists, political scientists and sociologists there is no consensus on what institutions are, what forces influence their preservation and change, and how we can influence institutional development. This interdisciplinary book proposes a concept of institutions that brings together seemingly opposing strands of institutional analysis in the social sciences. It takes a unified approach to the study of the origins and maintenance of institutions, their change, and the influence of previous institutions on subsequent ones. The merits of this approach are demonstrated through comparative studies of institutions in the medieval European and Muslim worlds. This comparative analysis of the institutional foundations of markets and states and their dynamics also contributes to understanding the functioning of modern economies. It shows the distinctiveness of European institutions and explains how and why they led to the emergence of the modern economy, supporting impersonal exchange, efficient states and the use of knowledge.