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• Institutions


  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
  • Informal constraints
  • 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


  The 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
• Rights over an asset

  • Rights of Control
  • Rights to Income
  • Rights of Alienation
• 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


  The 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
• Coase Theorem


  Presented in his paper, "The Problem of Social Cost" (1960)
• Ronald Coase


  • Introduced key concepts that have become fundamental to the field of NIE. His seminal work on transaction costs and property rights laid the groundwork for much of NIE.
• Douglass North

  • Expanded New Institutional Economics by emphasizing the role of institutions in economic development. His studies highlighted 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. Williamson's work on the nature of the firm and governance structures highlighted the importance of hierarchies and markets in reducing transaction costs.
• Applications of New Institutional Economics

  • 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. Jessop's work focuses on the complexity of modern governance and the need for a coordinated approach to managing various governance mechanisms.
• Applications of Meta-Governance

  • Environmental Policy
  • Urban Planning
  • Public Health
• Formal Constraints


  Statute law, common law, regulations etc.
• Informal constraints - conventions, norms of behavior, and self-imposed codes of conduct etc.
• 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.