Abstract
New Institutionalist Economics (NIE) offers a seminal contribution to the wider debate on governance. NIE arose as the result of a growing interest among rational choice theorists in explanations for the emergence and change of institutions, specifically the link between individual agency and structural transformation. It presented a theory of institutions in order to extend neoclassical economics, which presumed that a complete set of smoothly functioning markets exists but did not refer to institutions to explain their existence and working. New institutionalism was a reaction against the ‘hyper-individualism’ of classical economic theory. Its principal offering is that institutions are the rules of the game in society, or more formally, are the humanly devised constraints that shape human interaction. Among its principal architects, Douglass North (1990) emphasised that institutions reduce uncertainty in human exchange, which arises in the first place because human beings have incomplete information and limited mental capacity by which to process information. Institutions help to manage the demands and costs transacting.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Author information
Authors and Affiliations
Copyright information
© 2009 Vasudha Chhotray and Gerry Stoker
About this chapter
Cite this chapter
Chhotray, V., Stoker, G. (2009). Governance and the New Institutional Economics. In: Governance Theory and Practice. Palgrave Macmillan, London. https://doi.org/10.1057/9780230583344_3
Download citation
DOI: https://doi.org/10.1057/9780230583344_3
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-36117-5
Online ISBN: 978-0-230-58334-4
eBook Packages: Palgrave Political & Intern. Studies CollectionPolitical Science and International Studies (R0)