🗓️ Session 5: Institutional Economics and Development I

Author
Affiliation

Claudius Gräbner-Radkowitsch

EUF and JKU

Published

07 11 2025

Modified

13 11 2025

Abstract

This session explores the “development puzzle” - why countries with similar geography, resources, and colonial heritage can have vastly different development outcomes. Institutional economics pretents to have found the answer! We examine two competing paradigms in institutional economics: Original Institutional Economics (OIE), with its evolutionary and critical approach, and New Institutional Economics (NIE), which integrates institutions into mainstream economic theory.

🖥️ Lecture Slides

Either click on the slide area below or click here to download the slides.

📚 Mandatory Reading

🏆 Further Readings

  • Hodgson (2006)
    • Comprehensive discussion of the definition of an institution and its implications
  • Hodgson (2004)
    • Foundational text on the history and central elements of original institutional economics
  • Menard and Shirley (2014)
    • Good overview over central tenets of new institutional economics

✍️ Coursework

Compare and contrast Original Institutional Economics (OIE) and New Institutional Economics (NIE) approaches. Focus on:

  • Different conceptions of actors (socially embedded vs. rational optimizer)
  • Views on institutional change (evolutionary vs. efficiency-driven)
  • Treatment of power and inequality
  • Policy implications of each approach

Which approach do you find more convincing for understanding development challenges, and why? (400 words)

If you have questions or problems, please post them in the Moodle forum.

References

Hodgson, G. (2004) The Evolution of Institutional Economics, London; New York: Routledge.
Hodgson, G. (2006) “What are institutions?” Journal of Economic Issues 40(1): 1–25.
Hodgson, G. M. (2018) “Taxonomic definitions in social science, with firms, markets and institutions as case studies,” Journal of Institutional Economics 84: 1–18, doi:10.1017/s1744137418000334.
Ménard, C. and Shirley, M. M. (2014) “The future of new institutional economics: From early intuitions to a new paradigm?” Journal of Institutional Economics 10(04): 541–565, doi:10.1017/s174413741400006x.