🗓️ Session 5: Institutional Economics and Development I

Author

Affiliation

Claudius Gräbner-Radkowitsch

EUF and JKU

Published

23 10 2026

Modified

23 10 2026

Abstract

This session explores the “development puzzle” - why countries with similar geography, resources, and colonial heritage can have vastly different development outcomes. Institutional economics claims to have found the answer! We examine two competing paradigms in institutional economics: Original Institutional Economics (OIE), with its evolutionary and critical approach, and New Institutional Economics (NIE), which integrates institutions into mainstream economic theory.

🖥️ Lecture Slides

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📚 Mandatory Reading

Hodgson (2018)

🏆 Further Readings

Hodgson (2006)
- Comprehensive discussion of the definition of an institution and its implications
Hodgson (2004)
- Foundational text on the history and central elements of original institutional economics
Menard and Shirley (2014)
- Good overview over central tenets of new institutional economics

✍️ Coursework

Optional Exercise

Compare and contrast Original Institutional Economics (OIE) and New Institutional Economics (NIE) approaches. Focus on:

Different conceptions of actors (socially embedded vs. rational optimizer)
Views on institutional change (evolutionary vs. efficiency-driven)
Treatment of power and inequality
Policy implications of each approach

Which approach do you find more convincing for understanding development challenges, and why? (400 words)

If you have questions or problems, please post them in the Moodle forum.

References

Hodgson, G. (2004) The Evolution of Institutional Economics, London; New York: Routledge.

Hodgson, G. (2006) “What are institutions?” Journal of Economic Issues 40(1): 1–25.

Hodgson, G. M. (2018) “Taxonomic definitions in social science, with firms, markets and institutions as case studies,” Journal of Institutional Economics 84: 1–18, doi:10.1017/s1744137418000334.

Ménard, C. and Shirley, M. M. (2014) “The future of new institutional economics: From early intuitions to a new paradigm?” Journal of Institutional Economics 10(04): 541–565, doi:10.1017/s174413741400006x.

--- title: "🗓️ Session 5: Institutional Economics and Development I" date: "2026-10-23" date-modified: last-modified --- ## Abstract This session explores the "development puzzle" - why countries with similar geography, resources, and colonial heritage can have vastly different development outcomes. Institutional economics claims to have found the answer! We examine two competing paradigms in institutional economics: Original Institutional Economics (OIE), with its evolutionary and critical approach, and New Institutional Economics (NIE), which integrates institutions into mainstream economic theory. ## 🖥️ Lecture Slides  ```{=html} <div class="container" style="position: relative;overflow: hidden;width: 100%;padding-top: 56.25%;"> <iframe src="slides/DevEcon26_L05_Institutions-I.html" style="position: absolute;top: 0;left: 0;bottom: 0;right: 0;width: 100%;height: 100%;" allowfullscreen loading="lazy"></iframe> </div> ``` [Open the slides in a separate tab](slides/DevEcon26_L05_Institutions-I.html){.btn .btn-primary target="_blank"} ::: {.callout-tip collapse="true"} ## Would you rather have a PDF? Open the slides, click the ☰ button in the **top right** corner, and choose **Tools → PDF Export Mode**. Then print the page (<kbd>Cmd</kbd>/<kbd>Ctrl</kbd> + <kbd>P</kbd>) and save it as a PDF. :::  ## 📚 Mandatory Reading - Hodgson [-@hodgson18] ## 🏆 Further Readings - Hodgson [-@hodgson2006] - Comprehensive discussion of the definition of an institution and its implications - Hodgson [-@hodgson04] - Foundational text on the history and central elements of original institutional economics - Menard and Shirley [-@menard2014] - Good overview over central tenets of new institutional economics ## ✍️ Coursework ::: {.callout-tip collapse="true"} ## Optional Exercise Compare and contrast Original Institutional Economics (OIE) and New Institutional Economics (NIE) approaches. Focus on: - Different conceptions of actors (socially embedded vs. rational optimizer) - Views on institutional change (evolutionary vs. efficiency-driven) - Treatment of power and inequality - Policy implications of each approach Which approach do you find more convincing for understanding development challenges, and why? (400 words) ::: If you have questions or problems, please post them in the [Moodle](https://elearning.uni-flensburg.de/moodle/course/view.php?id=17917) forum. ## References ::: {#refs} :::