Institutional Economics

Abstract

Institutional economics, also concerned with resource allocation and the level and distribution of aggregate income, is primarily concerned with the organization and control of the economy, that is, its power structure, which governs whose interests count. Institutionalists have a broader or deeper set of explanatory variables, including the fundamental economic role of government, the socialization of the individual, and the consequences of a business system. Thus, prices are a function of demand and supply, these a function of markets and rights, manifest in the actions of firms and governments, and the latter a matter of business control of government.

This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume