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International Society for New Institutional Economics



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IPI_Marker

International Society for New Institutional Economics -
http://www.isnie.org/

This is a great site for all those people who want to understand more
about Economics of Institutions - like Law, State, Markets etc.

Instead of fighting between between Socialism and Capitalism this new
area of research in Institutional Economics, promoted by Ronald Coase,
focuses on how different instiutions are formed, evolv and work.
Traditional economics directly deals with demand and supply, prices
etc. assuming existince of underlying institutions such as private
property, law, markets etc. However, this just begs the question - Why
are these institutions formed in the first place? If market is so
efficient then why doesn't individuals deal with each other on
individual basis in the free market. Why they form associations such a
Govt., Firms, etc?

The answer is transaction costs! In order to "transact" or exchange
goods and services each one of us has to know what he wants, what is on
offer by others, resources are required to actually deliver the goods
and services physically, and then each one of us has to monitor the
completion of the exchange. These all costs are clubbed together in the
concept of "transaction costs" which are different from cost of
production of goods and services.

This is the reason why different institutions are formed in order to
reduce the transaction costs even if it means we have to sacrifice our
freedom.

I believe this site with its emphasis on Institutional Economics will
allow this forum to have more intelligent and well informed policy
debate about India.

Regards,
Ashish



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