Abstract
ABSTRACT This paper conceives of the market as an institution, and contrasts two theoretical approaches: Institutionalism, with an evolutionary and analytical bias, whose theoretical basis comes from “Old/Original” Institutionalism, and New Institutional Economics, with an analytical, contractual approach, linked to mainstream economics. Both approaches have given relevant contributions, as they consider the importance of institutions for economic performance. The limits of New Institutional Economics are particularly relevant, whose analysis of the operation of markets is centered on the logic of transaction cost economics as a determinant of economic performance. Evolutionary Institutionalism, in turn, sees the market within a broader scope, in which cost economies only partially explains economic performance, but it is not necessarily seen as a determining factor.
Highlights
The perspective that capitalist economy must be understood through and beyond market mechanisms has long been absent in both theoretical and applied analyses of the dominant trend in Economics
The way in which the logic of efficiency of free-market mechanisms has been incorporated into neoclassical economic theory throughout the twentieth century has caused the market to become but a locus of exchanges, which would lead to the solution for the most relevant economic problems, including those related to growth
The conception of the market as a “dependent variable” would eventually demonstrate the lack of perception of neoclassical economic theory, as it does not accept that the market comes into being out of a historical process; it is not a matter of pre-established data, in face of which economic agents maximize their utility and production functions in accordance to a price system regulated by supply-and-demand laws
Summary
450-468 institution, this does not imply that it should be uniformly viewed as such, as regards both its historical formation and its function in the performance of various different economies This is evident, for example, when the concept of market adopted by NIE is contrasted with the concepts adopted by Institutionalist trends with an analytical and evolutionary bias. It should be noted that, as institutionalist approaches resurface, some differences persist in terms of the meaning of market and its function in economic performance, as we will see below, as well as the understanding of the behavior of economic agents in face of the market It is worth of notice the fact that the importance of institutions, as a fundamental aspect to economic analysis, is new to mainstream economics only. This section approaches Institutionalism in Economics from two analytical perspectives, which are based on different starting points; on the one hand, Evolutionary Institutionalism, influenced by Veblen’s “evolutionary” perspective, and, on the other hand, NIE, centered around transaction costs, originally developed by Coase, and disseminated as theory especially by Williamson
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