Introduction: This article reconstructs Douglas North’s theory of conceptual formulation in terms of the relationship between reality and mind. Influenced by Weberian methodology, North argues that reality is unstable and fluid, and that the human mind, due to its cognitive limitations, is incapable of fully comprehending it. Therefore, the scientific study of reality necessitates the formulation of self-sufficient abstract concepts that are not objective representations of reality but rather cognitive tools designed to organize the complexities of the social world. These concepts, such as limited access order and open access order, provide the universality and necessity required for scientific inquiry without deriving their legitimacy from external reality.
Drawing inspiration from cognitive sciences, North considers mental models as instruments for reducing uncertainty in the human environment and introduces conceptual frameworks as the conditions of possibility for scientific explanation of this environment. According to North, institutions are the concrete and social embodiment of these mental models. Emphasizing both the fluidity of reality and the limitations of the mind, he maintains that understanding historical transformations and bringing order to events requires a theory of history. His historical theory explains institutional change through a subjective interpretation based on the notion of path dependence, which is essentially a reconstruction of the learning process over time. This perspective enables the scientific study of singular phenomena without reducing them to universal laws.
North’s theory offers a conciliatory solution to the methodological debate between generalizing and particularizing approaches: economic history as a science becomes possible not through the discovery of fixed laws but through the formulation of self-sufficient, contextual, and testable concepts. Although these concepts have a subjective character, they maintain scientific validity due to their non-arbitrary nature and provide a robust framework for analyzing long-term institutional transformations.
Methods: This study is based on a theoretical and conceptual reconstruction of North’s work, focusing on his methodological and epistemological presuppositions. The approach involves a qualitative analysis of North’s key writings, particularly those addressing institutional change, cognitive sciences, and economic history. The reconstruction draws on concepts such as mental models, path dependence, and the distinction between limited and open access orders. The analytical framework is informed by Weberian methodology and cognitive science literature to interpret North’s theory of conceptual formulation. No empirical data collection or statistical analysis is employed; rather, the method consists of interpretive textual analysis and conceptual synthesis.
Findings: To fully understand North’s theory, one must pay attention to its ontological and epistemological presuppositions. North conceives social reality as fluid and constantly changing—a reality lacking intrinsic rationality and incapable of being fully and objectively known. This view is heavily influenced by Max Weber’s idea that social reality is infinitely complex and the human mind cannot grasp its entirety. In such circumstances, scientific concepts are not representations of reality but cognitive instruments constructed by researchers to understand parts of this complex reality.
Building on cognitive science, North demonstrates how the human mind manages environmental complexities through mental models and conceptual frameworks. These mental models are constantly evolving and are shaped by various factors such as individual experiences and cultural-historical contexts. The key point here is that these models are inherently incomplete and always susceptible to error. It is precisely these cognitive limitations that explain the necessity of institutions; institutions, as social constructs, are in fact the embodied manifestation of these mental models that structure social life.
North’s theory of path dependence explains why some institutions persist despite inefficiency. This concept illustrates that past choices and decisions constrain future possible paths. In other words, history matters because current and future conditions are shaped by the continuity of past institutions. This perspective stands in contrast to neoclassical approaches, which typically lean toward static and ahistorical analyses.
Conclusion: The significance of North’s theory lies in its provision of a solution to one of the longstanding methodological problems of social sciences: how can singular and historical phenomena be studied scientifically? North’s answer is that this can be achieved through recourse to self-sufficient concepts that, although abstract, are formed non-arbitrarily and within specific historical-cultural contexts. These concepts are neither fully general nor entirely particular; rather, they occupy a middle ground, which makes them particularly suitable for the scientific study of history.