Revisiting New Institutional Economics as a Meta-Paradigm

Abstract

This paper is aimed at looking at New Institutional Economics (NIE) as a meta-paradigm i.e. group of paradigms that has common roots and has evolved over a period of time as an integrative theory. In the last two decades, the field underwent considerable development, and an attempt is made here to collate it on a framework and find out the way ahead. NIE has developed as a movement within the social sciences, especially economics and political science, which unite theoretical and empirical research examining the role of institutions in furthering or preventing economic growth. The essential idea of NIE is that the success of a market system is dependent upon the institutions that facilitate efficient private transactions. Simply put, NIE tackles social, economic, and political institutions that govern everyday life. It takes a wider view and approach to issues that are considered under categories of law and economics, applied industrial organization, public policy, and other specialties. NIE is seen by many as an extension to neo-classical economic theory by incorporation of property rights and transactions costs into the orthodox frameworks for analysis so as to better explain economic behavior. The paper looks at the field right from the evolution of the field, discusses the analytical perspective, differentiates it from the traditional institutional economics, discusses criticism versus the defense and finally looks at the future prospects for the field.