Lucas Reading 13 Jan 15

Front 1

New Institutional Economics - Confession, assertion and recommendation

Back 1

C- we are still very ignorant about institutions

A-there has been enormous progress with institutions

R - accept pluralism

Front 2

NIE turned on two propositions

Back 2

1. Institutions do matter

2. Determinants of institutions are susceptible to analysis by the tools of economic theory

Front 3

NIE is concerned with what levels

Back 3

2 and 3

Front 4

Level 1 is what?

Back 4

Social Embeddedness and is very slow to change

Front 5

Embeddedness

Back 5

refers to the degree to which economic activity is constrained by non-economic institutions.

Front 6

Level 2 is what?

Back 6

- Institutional Environment

- Constrained by the shadow of the past the design instruments of level 2 include the executive , legislative, judicial and bureaucratic functions of government as well as the distribution of powers across different levels of government

-Property rights

Front 7

Positive Political Theory

Back 7

concerned with working out the economic and political ramifications of level 2 features

Front 8

Level 3 is what?

Back 8

where institutions of governance are located, contract laws

Front 9

Level 4 is what?

Back 9

level where neoclassical analysis works, agency theory

Front 10

Key good idea of NIE

Back 10

Human actors - social scientists should be prepared to name the key attributes of human actors

Front 11

Any standard economic theory starts from the existence of the

Back 11

firm

Front 12

Conclusion says what about NIE

Back 12

Still a lot of work to be done in this field

Front 13

Williamson

Back 13

New Institutional Economics: Taking Stock, Looking ahead

Front 14

New Institutional Economics

Back 14

is an economic perspective that attempts to extend economics by focusing on the social and legal norms and rules (which are institutions) that underlie economic activity

Front 15

North

Back 15

Institutions

Front 16

Institutions are

Back 16

- the humanly devised constraints that structure political, economic and social interaction

- provide incentive structure for economy

- creates order and reduce uncertainity

Front 17

Institutions reduce

Back 17

transaction and production costs per exchange so that potential gains from trade are realizable

Front 18

Two problems with long distance trades in regards to transaction costs

Back 18

1. Agency - due to measuring performance, strength of kinship and defection

2.Contract negotiation and enforcement in alien parts of the world

Front 19

A capital market must have

Back 19

security of property rights over time and will simply not evolve where political rulers can seize assets

Front 20

Tribal societies rely on

Back 20

dense social networks

Front 21

Features of the Suq

Back 21

1. high measurement costs

2. continuous development of repeat-exchange relationships

3. intensive bargaining

Front 22

Caravan trade

Back 22

protection was essential and no organized state exists

Front 23

Costs that decreased cost of exchange over long distances

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1. Mobility of capital

2. Lowered information costs

3. Spread risk

Front 24

Improved knowledge and skills meant

Back 24

getting better information on opportunities and having greater bargaining skills than other traders

Front 25

What are key to much of the political and economic exchanges?

Back 25

paternalistic relationships

Front 26

Performance Through Time

Back 26

North

Front 27

Economics history is

Back 27

about the performance of economies through time

Front 28

In the analysis of economic performance through time it contained two erroneous assumptions

Back 28

1. institutions do not matter

2. time does not matter

Front 29

Article provides

Back 29

initial analytical framework capable of increasing our understanding of the historical evolution of economies by adding the dimension of time

Front 30

Institutions are

Back 30

the humanly devised constraints that structure human interaction

Front 31

Transaction costs are

Back 31

the costs of specifying what is being exchanged and of enforcing the consequent agreements

Front 32

What shapes the institutional evolution of an economy

Back 32

interaction between institutions and organizations

Front 33

Organizations are made up of

Back 33

groups of individuals bound together by some common purpose to achieve certain objectives

Front 34

The organizations that come into existence will reflect opportunities provided by

Back 34

the institutional matrix

Front 35

The speed of economic change is a function of

Back 35

the rate of learning

Front 36

Learning comes from two experiences

Back 36

1. Physical

2. Socio-cultural linguistic

Front 37

Collective Learning

Back 37

consists of those experiences that have passed the slow test of time and are embodied in our language, institutions, technology, and ways of doing things

Front 38

The learning process appears to be a function of

Back 38

1. the way in which a given belief structure filters the information derived from experiences

2. the different experiences confronting individuals and societies at different times

Front 39

Individuals will usually find it worthwhile cooperating with others in exchange

Back 39

when the play is repeated, when they possess complete information about other players past performance, when there are small number of players

Front 40

To understand economic change-we must take into account

Back 40

1. It is the admixture of formal rules, informal norms, and enforcement characteristics that shapes economic performance

2. Polities significantly shape economic performance because they define and enforce the economic rules

3.It is adaptive rather than allocate efficiency which is the key to long-run growth