The 'new institutional economics' in agricultural development: Insights and challenges

Abstract

The insights of the 'new institutional economics' (NIE) and the challenges it faces are discussed, using examples from agricultural development. NIE has emerged from the theories of the firm, markets, history and politics. It is characterised by two propositions: (i) the nature of business contracts is determined by uncertainties and assurances arising from market conditions and from prevailing institutions (property rights, conventions, authority structures); (ii) prevailing institutions are altered by social action responding ultimately to trend changes in relative prices. Empirical progress in NIE has resulted from studies of contracting behaviour and has been greatest in measurement of intraindustry transaction costs and relating them to vertical integration among firms. But NIE is at an early stage in the more complex empirical task of analysing relations between markets and prevailing institutions.