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The new institutional economics and agricultural organization


  • Roumasset, James


The institutional economics if John Commons (1934) contained two related objectives. The first was to explain the evolution of economics. The second was to analyze the effects of institutions on resource allocation and the distribution of income. The method of explaining the evolution of institutions was historical. In explaining resource allocation, Commons used institutional considerations such as interest groups and bargaining power largely as an alternative to neoclassical economics. Common’s brand of institutional economics has been practically extinct in the evolution of economic methodology. The reason for this is that historical explanations tend to be arbitrary and fail to identify alternative causes of change. At the time, “institutional” explanations of economic events and patterns tend to be ad hoc and irrefutable A body of literature has now been developed from somewhat diverse sources, however, which may provide a new paradigm for achieving Common’s objectives. Without claim to originality, we call this paradigm the new institutional economics. In explaining the existence and evolution of institutions, the new institutional economics uses conventional economic tools such as benefits, costs, and equilibrium. In explaining resource allocation and income distribution, the new approach uses institutions in conjunction with rather than as an alternative to neoclassical theory. One of the primary concerns of the new institutional economics is explaining nonmarket resource allocation. This is an especially important area of research for helping to describe the organization of agriculture in developing countries. Since the cost of market operation is characterized by economies of scale, markets for agricultural products in isolated regions of developing countries are often poorly developed or nonexistent. Factors of production are often contracted for by nonmarket devices. Similarly, agricultural products are typically disposed of (e.g., for and by an individual household). It is therefore important for understanding the prospects and potential for agricultural development to improve both our empirical and theoretical knowledge of these institutional arrangements. The purpose of the present paper is to provide a methodology for investigating institutional arrangements in agriculture and to illustrate the methodology by explaining selected patterns in agricultural contracts. The paper is organized as follows. In section I, we review the literature which makes up the new institutional economics. By integrating and extending the literature, a new method for explaining the organization of production emerges. This methodology is developed and described in section II. In section III, certain stylized facts about agricultural organization are presented, developed and explained using the principles discussed in section II.

Suggested Citation

  • Roumasset, James, 1978. "The new institutional economics and agricultural organization," MPRA Paper 13175, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13175

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    References listed on IDEAS

    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Yotopoulos, Pan A. & Lau, Lawrence J. & Somel, Kutlu, 1970. "Labor Intensity and Relative Efficiency in Indian Agriculture," Food Research Institute Studies, Stanford University, Food Research Institute, issue 01.
    3. A. Michael Spence, 1975. "The Economics of Internal Organization: An Introduction," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 163-172, Spring.
    4. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    5. Paul A. Samuelson, 1950. "Evaluation Of Real National Income," Oxford Economic Papers, Oxford University Press, vol. 2(1), pages 1-29.
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    Cited by:

    1. James Roumasset, 2004. "Rural Institutions, Agricultural Development, and Pro-Poor Economic Growth," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 1(1), pages 61-82, June.
    2. James, William E. & Roumasset, James A., 1979. "Explaining Variations In Share Contracts: Land Quality, Population Pressure And Technological Change," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 23(02), August.
    3. James Roumasset, 2010. "Wither the Economics of Agricultural Development?," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 7(1), pages 1-22, June.
    4. Roumasset, James A., 1994. "Explaining Diversity In Agricultural Organization: An Agency Perspective," Bulletins 12982, University of Minnesota, Economic Development Center.
    5. Roumasset, James, 2008. "A new institutional approach to pro-poor agricultural development: Lessons from Asia," Journal of Asian Economics, Elsevier, vol. 19(5-6), pages 378-388.
    6. Karl Jandoc & Richard Howitt & James Roumasset & Christopher Wada, 2014. "Institutions for Managing Ground and Surface Water and the Theory of the Second-Best," Working Papers 201415, University of Hawaii at Manoa, Department of Economics.
    7. Evenson, Robert E. & Roumasset, James A., 1986. "Markets, Institutions and Family Size in Rural Philippine Households," Philippine Journal of Development JPD 1986 Vol. XIII Nos. 1, Philippine Institute for Development Studies.

    More about this item


    new institutional economics;

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy


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