Economic Behavior and Institutions: Principles of Neoinstitutional Economics (Cambridge Surveys of Economic Literature) [Paperback]

Thrainn Eggertsson (Author)

Book Description

ISBN-10: 0521348919 | ISBN-13: 978-0521348911 | Publication Date: June 29, 1990

An important new research program has developed in economics that extends neoclassical economic theory in order to examine the effects of institutions on economic behavior. The body of work emerging from this new line of inquiry includes contributions from the various branches of economic theory, such as the economics of property rights, the theory of the firm, cliometrics and law and economics. This book is the first comprehensive survey of this research program, which the author terms "neoinstitutional economics." The author proposes a unified approach to this research, integrating the work of various contributors and emphasizing the common principles of inquiry that tie the work together. The theoretical discussion is accomplished by empirical studies dealing with a whole range of institutions and economic systems.

Editorial Reviews

Review

"The survey succeeds in my view precisely in presenting and linking in a convincing way quite disparate material." Arthur Denzau, Washington University

"This study is much more than an excellent survey of diverse bodies of political and economic literature that falls under the author's rubric of neoinstitutional economics. In the process of integrating and synthesizing this literature Thrainn Eggertsson has made important original extensions and contributions to a burgeoning field of the social sciences." Douglass C. North

"In this delightful book, Thrainn Eggertsson delivers far more than he promises. As the title suggests, he tells us what economists know about institutions and economic performance. He does this well, skillfully guiding the reader from asset specificity to structure induced equilibrium. But he does more than simply report what others have said. The organization of his survey reveals what institutionalists themselves often obscure--the simple, even elegant, logic of their inquiry. He also discusses lucidly how economists can (and how they cannot) help those who are searching for better institutions." Andrew R. Rutten, Journal of Economic Literature

"This book should serve a wide audience. Those who want an introduction to the economic way of thinking about institutions will appreciate its common sense, rigor, and clarity....Those who already know the field, whether friend or foes, will appreciate Eggertsson's fairness, scope, and thoughtfulness. At the very least, they find new perspectives on old and familiar ideas; most will find more. Economists in particular, would benefit from a careful study of the sections on politics. What more can we ask of a survey?" Andrew R. Rutten, Journal of Economic Literature

"This book provides an extremely useful survey of what the author...calls 'neoinstitutional economics'....the book performs an extremely valuable function and can be read with great profit by anyone interested in institutional issues, neoclassical or otherwise." Malcolm Rutherford, Journal of Economic Behavior and Organization

"This book would definitely help many researchers who want to undertake the challenge of ideology and culture. It should prove as well very useful for advanced undergraduates who would like to know about the quiet transformation of economics." Elias L. Khalil, International Review of Economics and Finance

Book Description

A survey of an important new research program that extends to classical economic theory to examine the effects of institutions on economic behavior.

Product Details

• Paperback: 404 pages
• Publisher: Cambridge University Press (June 29, 1990)
• Language: English
• ISBN-10: 0521348919
• ISBN-13: 978-0521348911
• Product Dimensions: 8.3 x 5.4 x 1.1 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #644,097 in Books (See Top 100 in Books)

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4.0 out of 5 stars Move just a smidge past the neoclassical framework, November 23, 2007

By 

Stephen R. Laniel (Cambridge, MA USA) - See all my reviews
(REAL NAME)   

This review is from: Economic Behavior and Institutions: Principles of Neoinstitutional Economics (Cambridge Surveys of Economic Literature) (Paperback)

I didn't realize how very excellent this book was until I thought about it for a while and let its tastes stew together with those of Schelling's "Micromotives and Macrobehavior".

Thrainn Eggertsson's goals in "Economic Behavior and Institutions" are modest: move beyond the neoclassical framework of perfect rationality and costless complete contracting, but only a little way beyond: assume positive transaction costs, and see what happens. It is a fine introduction to 40 or 50 years of transaction-cost economics, starting with Coase. Eggertsson shows us that the work of many economists can be made coherent in the light of transaction costs. Some examples:

* Akerlof's market for lemons. If you didn't need to spend any time investigating the quality of a used car before buying it, because the car's quality was instantly apparent, there would be no market-for-lemons problem.
* Coase: corporations wouldn't be necessary if contracting were costless. Corporations exist because buying all your industrial inputs, contracting for labor and so forth entail positive costs. There comes a point when it's cheaper to forego the free market and bring all of this work in house. That point is where corporations spring to life.
* The principal-agent problem: in a world of perfect, costless information, shareholders would instantly know whether the executives they've hired to monitor a company are doing a good job; bosses wouldn't have to do any work to detect shirking, and hence would lose much of their value; voters would know whether their elected representatives are doing what they were sent to do. Organizations like the ACLU that keep tabs on my senators when I don't have the time to would cease to exist. What binds all these cases together is that there's a principal (shareholders, bosses, watchdogs), an agent (executives, workers, representatives), and a conflict between the desires of the former and the desires of the latter. This conflict disappears in a world of perfect information.
* Most fascinating to me: money itself -- that is, something like a dollar bill that is valueless on its own, but in which the value of all other goods can be expressed -- is unnecessary in a world without transaction costs. If you wanted the cars that I sold and I wanted your grain, we would instantly know the quality of each other's products, instantly trade, and be done. Why bother with all the costs involved in supporting a currency (among which is the cost of preventing counterfeiting) if you can barter costlessly? But of course you cannot: you don't know that my cars are high-quality and I don't know that your grain is tasty.

These are all stories, of course. Corporations could come about for other reasons, as could currency. But they're good stories, and they're probably falsifiable. Eggertsson doesn't spend much time on the data itself; it's almost certain, though, that the many authors he cites have spent that time. Economic Behavior and Institutions is valuable mostly as a pointer to further work in areas that might interest the reader. If you're interested in basically any part of microeconomics, there's something in here for you. Its reach even extends, as the examples above show, into regions like political science that might seem remote from economics. It's a joy to read, and like Micromotives it shows what fun economics can be if handled right.