The New Institutional Economics

I am pleased to have been invited to provide concluding comments to this third annual conference on the New Institutional Economics. Following last year's final speaker, Oliver Williamson, I would begin by quoting Ronald Coase's concluding comment to the first conference. "Modern institutional economics should study man as he is, acting within the constraints imposed by real institutions. Modern institutional economics is economics as it ought to be." (Coase [1984], p. 231) But as is appropriate for a new thriving subdiscipline of economics, my remarks about what the new institutional economics is and where it is going sometimes disagree with those of Williamson [1985]. Modern institutional economics begins with two premises: 1) that the theoretical framework should be capable of integrating neo-classical theory with an analysis of the way institutions modify the choice set available to human beings; and 2) that this framework must build upon the basic determinants of institutions, so that we can not only define the choice set really available to people at any time, but also analyze the way in which institutions change and therefore alter the available choice set over time.

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