Institutional Economics, and Me
Oct. 12th, 2009 09:35 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
kent_allard_jrAs Krugman explains, this year's recipients of the Nobel economics prize, Elinor Ostrom and Oliver Williamson, were pioneers in the field of Institutional Economics, which basically shows why some economic activities are carried out within firms, in a sort of mini-command economy, while others take place in the market between them. As I recall, the main reason given for doing things within a firm, as opposed to in a market, is to reduce transaction costs.
In graduate school, I took a class on the use of New Institutional Economics in political science. (Note that Ostrom is a political scientist.) The main thrust of the course was that governments developed for the same reason that firms do: They were instituted to reduce transaction costs in the economy. I admit I was highly dubious of the whole project, which smacked uncomfortably (to me) of the old, ahistorical social contract theories, and seemed to diminish the role of naked force in the development of the state. While I still think my critique was on target, it was kind of silly for me to take a class when I disagreed with its premise. I did my final paper (on term limits -- which were fashionable at the time -- and how they increased transaction costs between voters and congressmen), squeaked through with a reasonable grade and forgot most of it.
Note: No one should get the impression, from the second paragraph, that there's anything wrong with Ostrom and Williamson. I'm not arrogant enough to critique them! Oh yeah, those Nobel Prize winning losers, they don't have true geeeeeeeenius like me, an underemployed stat guy...
In graduate school, I took a class on the use of New Institutional Economics in political science. (Note that Ostrom is a political scientist.) The main thrust of the course was that governments developed for the same reason that firms do: They were instituted to reduce transaction costs in the economy. I admit I was highly dubious of the whole project, which smacked uncomfortably (to me) of the old, ahistorical social contract theories, and seemed to diminish the role of naked force in the development of the state. While I still think my critique was on target, it was kind of silly for me to take a class when I disagreed with its premise. I did my final paper (on term limits -- which were fashionable at the time -- and how they increased transaction costs between voters and congressmen), squeaked through with a reasonable grade and forgot most of it.
Note: No one should get the impression, from the second paragraph, that there's anything wrong with Ostrom and Williamson. I'm not arrogant enough to critique them! Oh yeah, those Nobel Prize winning losers, they don't have true geeeeeeeenius like me, an underemployed stat guy...
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