Literature Review: New Institutionalist Economics (NIE)

To understand what the World Bank means by market institutions, it is important to delve deeper into North’s and some other important work in NIE to grasp the analytical ‘institution’ in this tradition. This is intended, more urgently, for two purposes here: (a) the theoretical point of departure in this tradition and (b) the underlying ontological assumptions. How the analytic concept of ‘institution’ takes shape, what it says and what it excludes, and its application in research and policy has a lot to do with the above two elements. This is not a comprehensive review of all that is associated with and applies an NIE framework, and only deals with the above two elements insofar as discussed in some theoretically significant NIE literature (some commonality is assumed in these core assumptions among thinkers associated with this tradition, otherwise it wouldn’t be a tradition). The effort here is, therefore, to go some way in gleaning core theoretical-epistemological principles in NIE. This review plays another important role: to help develop a theoretical framework that builds on the critique in this chapter.