EC 045 Lecture Notes - Lecture 4: Coase Theorem, New Institutional Economics
26 Apr 2018
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Document Summary
New institutional economics- institutions are key for explaining the different paths of growth in world economy. Institutions- the humanly devised constraints that shape human interaction. Informal- norms of behavior, conventions, traditions: organizations- groups of individuals bound by some common purpose to achieve objectives, transactions- exchange of money for goods and services in the market, the costs for using the market mechanism include. Searching for information about price and quality, and search for buyers and sellers for relevant information about their behavior. Bargaining needed to find true position of buyers and sellers. Monitoring of contractual partners to see if they abide to contract. Enforcers are agents with their own goals: coase theorem. Ex: a cattle ranchers cattle destroy crops.
