Notes on neoinstitutional economics

Abstract

In mainstream economic theory — neoclassical economics — one had for a long time taken for granted that the institutional framework of social interaction had to be treated as something exogenously given and beyond the explanatory and analytical realms of theory. Institutions were for sociology and political science to handle, not for pure economics. More recently, however, the scope of economic theory has been widened through the incorporation of institutions. This has to a large extent grown from an increasing awareness of the farfetched consequences of the institutional presumptions on which much of the earlier theorizing was built. The analysis is therefore broadened by supplementing the hard core with institutional analysis. One has even attempted to explicate the economic rationale of the formation or sustenance of institutions by endogenizing them, e. g. by applying different kinds of evolutionary theories.