The rules of the game of a society or more formally are the humanly-devised constraints that structure human interaction
Components of institutions
Formal rules (statute law, common law, regulations etc.)
Informal constraints (conventions, norms of behavior, and self-imposed codes of conduct etc.)
Enforcement characteristics of both
Formal rules to facilitate exchange
Political and Judicial rules that define the hierarchical structure of the polity, determine how decision making is made and control is conducted
Economic rules that define property rights and the ability to alienate an asset or a resource
Contracts that define specific agreement in exchange
Property rights
The acknowledged right to use and benefit from a tangible (e.g., land) or intangible (e.g., intellectual) entity that may include owning, using, deriving income from, selling, and disposing
Institutional framework with well-defined property rights
Lessens transaction costs of production and thus lead to more productive economic outcomes
Ownership
Possession of the residual rights of control and rights to residual returns
Secure property rights
They are clearly defined and contracts made to be enforceable
Types of rights over an asset
Rights of Control (constitute the exclusivity of property)
Rights to Income (are rights to use the income generated by the property)
Rights of Alienation (allow the owner to sell property for money, rent it or give it as a gift)
Principles of good governance
Rule of Law
Participation
Responsiveness
Consensus Orientation
Equity and Inclusiveness
Effectiveness and Efficiency
Accountability
Transparency
Accountability
Ensures that public officials and institutions are answerable for their actions and decisions
Transparency
Availability of information to the general public and clarity about government rules, regulations, and decisions
Effects of good governance, accountability, and transparency on economic development
Reduced Corruption
Improved Allocation of Resources
Increased Foreign Direct Investment
Strengthened Rule of Law
Enhanced Public Trust
New Institutional Economics (NIE)
A framework that extends traditional economic analysis by incorporating the role of institutions in shaping economic behavior
Key concepts of NIE
Transaction cost
Property rights
Contracts and Governance Structures
Institutional environment
Ronald Coase
Considered one of the founding figures of NIE, introduced key concepts that have become fundamental to the field, including transaction costs and property rights, and presented the Coase Theorem
Douglass North
Expanded New Institutional Economics by emphasizing the role of institutions in economic development, highlighting how institutions such as property rights, legal systems, and governance structures shape long-term economic performance and growth
Oliver Williamson
Expanded the analysis to transaction cost economics and organizational theory, highlighting the importance of hierarchies and markets in reducing transaction costs
Applications of NIE
Economic Development
Organizational theories
Public Policy
Meta-Governance
The processes, principles, and frameworks through which different forms of governance are coordinated and managed
Key concepts of Meta-Governance
Coordination of Governance Modes
Policy Integration
Reflexivity
Steering Mechanisms
Bob Jessop
Known for his work on state theory and governance, focusing on the complexity of modern governance and the need for a coordinated approach to managing various governance mechanisms