New institutional economics: it's nature, potential and the future
Herath, Gamini 2005, New institutional economics: it's nature, potential and the future, International journal of applied economics and econometrics, vol. 13, no. 1, pp. 35-60.
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Title
New institutional economics: it's nature, potential and the future
International journal of applied economics and econometrics
Volume number
13
Issue number
1
Start page
35
End page
60
Publisher
Transaction Publishers
Place of publication
New Brunswick, N.J.
Publication date
2005-01
ISSN
0971-8281 1530-7247
Summary
It is generally accepted that institutional problems have severely constrained development in many countries regardless of significant achievements in technology and other reforms. Both the Old and New Institutional Economics have relevance in understanding the lack of progress in many countries in Asia and Africa. Institutions generally refer to the "framework within which human interactions take place. Two major strands of NIE are the transaction costs and the collective action approach. The NIE implies that traditional rural institutions such as user groups, rotating credit and irrigation associations, interlinked credit etc. are institutions that have emerged in place of the market due to lower transactions costs. The successful management of common property resources such as water, forests, wetlands etc using local arrangements imply that institutions need to be interpreted in broader terms and the simple dichotomy of market or the government is too limited to understand the development process. New thinking is required in developing institutions that are structurally suited for management at the local level. Such an approach will have better chance to succeed compared to a process based upon the market.
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