Institutional Economics Syallabus
The concept of transaction. Market and
intra-firm transactions. Transaction costs as friction in the economy.
Transaction costs and transformation costs.
Interdependency between transaction costs and transformation costs.
Types of market transaction costs and means of transaction costs
minimization (search and information costs; measurement costs; bargaining and
decision costs; supervision and enforcement costs).
Comparative advantages and shortcomings of the legal enforcement
mechanism. Reputation as a contract enforcement device. Ideal model of
"perfect reputation". Shortcomings of the reputation as a contract
enforcement mechanism. Reputation and the "free rider problem".
Reputations aided by institutions.
Transaction costs, the main types of economic exchange and their
institutional structure. Coexistence of the main types of economic exchange in
the modern society.
Transaction cost
measurement.
The definition of property rights. Property rights in different
Laws/traditions
The property rights approach: some basic concepts. Specification of
property rights, the bundle of rights, partitioning of property rights,
attenuation of property rights.
Assigning of property rights: the internalization of externalities. The
Coase Theorem. Critic of Coase (dynamic effects of alternative legal rules,
wealth effect, distributional effects, strategic behavior and the problem of
holding-out, endowment effect, sociological critic, unrealistic assumption
about zero transaction costs)
Alternative property rights regimes. Common property (open access) and
the tragedy of the commons. Exclusive property rights and the conditions for
their emergence. The first economic revolution. Communal property. Optimal
group size. Private property. Moral and economic aspects of private property.
Public property.
The emergence of property rights. The
optimistic theory of the emergence of property rights (naive model). The
interest-group theory of property rights. The costs of collective action. The
theory of rent-seeking. Interest-groups and rent-seeking behaviour in an
economy.
Unit- I - Main Reading:
Blaug, Marc, Economic Theory in Retrospect, 3rd edn. Cambridge University Press, Cambridge and New York: 1978
Supplementary Reading:
Smith, Adam, The Theory of the Moral Sentiments, Edinburgh (1759) Available athttp://www.adamsmith.org/smith/tms-intro.htm
Veblen, TB, The Theory of the Leisure Class (1899). E-Version is Available at http://xroads.virginia.edu/~hyper/VEBLEN/veblenhp.html
Commons, John,R, "Institutional Economics", American Economic Review, vol. 21 (1931), pp.648-657. Available at
http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/commons/institutional.txt
Boulding, Kenneth The Economy of Love and Fear: A Preface to Grants Economics. Belmont, Calif.: Wadsworth. 1973
Boulding, Kenneth, Adam Smith as an Institutional Economist. Memphis: P. K. Seidman. 1976
Wray, L. Randall, Kenneth Boulding's Grants Economics. Journal of Economic Issues, Vol. 28, 1994
Green, Adam, Matter and Pyche: Lewis Mumford's appropriation of Marx and Jung in his appraisal of the condition of man in technological civilization, History of the Human Sciences, Vol. 19, No. 3, 33-64, 2006
Weber, Max, The Protestant Ethic and the Spirit of Capitalism (1904-1905)(English Trans. Talcott Parsons, Anthony Giddens, London ; Boston : Unwin Hyman, 1930.) available at http://xroads.virginia.edu/~HYPER/WEBER/cover.html