New Institutional Economics

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Description

Lars Zimmerman:

"New Institutional Economics is an economic perspective. There is information about it in the web. Wikipedia is as often a good start (I like the german article a bit better). Here is my little summary:

The number of human beings on this planet is incredibly high. Especially when you live in a big city you can experience this every day! Take a look around, all this faces, all this people in public space. You and each of them don’t know anything about 99,99+% of the rest, their lives, the things they believe, know, do etc. Isn’t it highly unlikely that given this situation humans can collaborate and build collectively fantastic and complex things like big train stations, the train tracks between them and maintain everything!?

How is it possible? How are we doing it? The answer of New Institutional Economics is: Institutions! For New Institutional Economics institutions are shared social norms and legal norms – in a way shared rules. They help to reduce complexity and allow relatively secure expectations and predictions (and therefore planning and coordination) in interactions.

From the german wikipedia article (translation by me):

- "Institutions in the sense of new institutional economics are formal and informal rules plus the mechanisms that enforce them, that limit the possibilities of individuals to act in transactions. They help to reduce insecurities and therefore support exchange between individuals."

Examples for institutions are markets, the law, the police but also the metric system and that we count time in hours, minutes and seconds for example. And out of and with these institutions complex things can emerge – like train stations and running train traffic." (http://bloglz.de/institutions-for-open-source-and-the-current-state-of-open-source/)