Essays on Strengths of Institutional Economics Essay

Download full paperFile format: .doc, available for editing

The paper "Strengths of Institutional Economics" is a great example of an essay on macro and microeconomics. One of the greatest strengths of Institutional Economics is that it makes the economic environment fairer. As stated there above, institutional Economics focuses on the role of institutions in shaping economic behavior in a given economic environment (Davis, 2007). These institutions help in structuring the interaction between human beings through formal constraints such as constitutions, laws, and rules that as well as through informal constraints such as codes of conduct, conventions as well as behavioral norms. Hence, institutions through the formal and informal constraints function in the economy for the common goal of all the individuals involved (Coase, 1998).

For example, the trade unions or employers association as well as other institutions such as trade agreements and trade associations lay down-regulation and enforce them to ensure that the economic environment is fair to every individual involved in the process of developing the economy through their collective action. As a matter of fact, the collective action of the institutions proves sometimes to be powerful than the collective action of the state or the political concern which drives which makes it possible for reciprocal relationships in the economy to be achieved (Demsetz, 1998).

In this regard, the school of Institutional Economy brings about fairness in the economy by enhancing reciprocal inter-relationships between the individuals in the economy where every individual benefit in the exchange and use of resources (services and goods) (Demsetz, 1998). The second greatest strength of Institutional Economics is that it makes the development of the economic environment orderly. This is achieved through the working rules that determine what the participants in the economy may be allowed to do or not to do.

This in turn brings about morality in the way things are done in the economy. For example, through the working rules institutions impose constraints on individuals from discriminating against other people because the collective action may not permit him/her to do so.  


Berle, A., and Gardner, M. The Modern Corporation and Private Property. New York, NY: Harcourt, Brace and World, 1967.

Coase, R. The New Institutional Economics. The American Economic Review, 1998, 88(2): 72-74.

Common, M. and Stagl, S. Ecological Economics: An Introduction. New York: Cambridge University Press, 2005.

Davis, J. Why Is Economics Not Yet a Pluralistic Science? Post-autistic Economics Review 43: 43-51, 2007.

Demsetz, H. Ownership, Control, and the Firm: The Organization of Economic Activity, Vol. 1. Blackwell Publishers, 1998.

Hodgson, G. "The Approach of Institutional Economics," Journal of Economic Literature, 36(1), pp. 162-166, 1998.

Keaney, M. "Critical Institutionalism: From American Exceptionalism to International Relevance", in Understanding Capitalism: Critical Analysis From Karl Marx to Amartya Sen, ed. Doug Dowd, Pluto Press, 2002.

Martinez-Alier, J., Ropke, I. Recent Developments in Ecological Economics, 2 vols., E. Elgar, Cheltenham, UK, 2008.

Schmid, A. Conflict and Cooperation: Institutional and Behavioral Economics. Blackwell, 2004.

Spash, C. The development of environmental thinking in economics. Environmental Values 8(4): 413-435, 1999.

Download full paperFile format: .doc, available for editing
Contact Us