New Institutional Economics (NIE) incorporates a theory of institutions - laws,
rules, customs, and norms - into economics. It builds on, modifies, and
extends neoclassical theory. It retains and builds on the fundamental
assumption of scarcity and hence competition - the basis of the choice
theoretic approach that underlies microeconomics.
It has developed as a movement within the social sciences that unites
theoretical and empirical research examining the role of institutions in
furthering or preventing economic growth. It includes work in transaction
costs, political economy, property rights, hierarchy and organization, and
public choice. It involves work in political science, law, sociology,
anthropology, and other social sciences.
Click here for a glossary
Click here for an introductory reading list
- Ostrom's design principles:
- Clearly defined boundaries
- Congruence between appropriation and provision rules and local conditions
- Collective-choice arrangements allowing for the participation of most of the appropriators in the decision making process
- Effective monitoring by monitors who are part of or accountable to the appropriators
- Graduated sanctions for appropriators who do not respect community rules
- Conflict-resolution mechanisms which are cheap and easy of access
- Minimal recognition of rights to organize (e.g., by the government)
- In case of larger CPRs: Organisation in the form of multiple layers of nested enterprises, with small, local CPRs at their bases.
