An economic thought emerged in the US, which, as a reference point in explaining economic processes, adopts an institution as a model educated by society. According to the leading thinker T. Veblen, the institution is "customary ways of regulating the life processes of society in relation to the material environment in which the society lives". Institutions shape human and social life through collective actions that provoke violence, coercion, discrimination and unfair competition.
The main sources of the trend are:
- social darwinism,
- cultural anthropology and pragmatism.
In the interwar period, it gained a significant place in American political thought.
Officially, the institutional trend was initiated by Veblen. However, the importance of this approach was already appreciated by Adam Smith himself. At the beginning, institutional economics had its supporters and opponents. Coexisted with other currents. In the second half of the 1940s, institutional economics was attached to sociological sciences, which was not respected by economists at the time. It was not until the 1970s that there was an initiative to restore it back. Then changed the new institutional economy of NEI.
New institutional economy NEI
Due to the global economic crisis, new economic trends have been created to improve the financial situation of the state. At that time, institutional economics also arose. In Poland there was a lot of interest in this trend of economics because it best suited the then state situation. It strived to ensure economic stability.
"When mainstream economics identifies balance as a point, institutionalists identify it with an institution system that:
- balances the various needs of members of society,
- it orders them to follow the rules of conduct that are in the interest of society, allowing them to choose a game strategy,
- guarantees continuity of rules and mechanisms,
- provides a greater degree of predictability of behavior of other members of society ".
The rationality of institutional economics
"In the process of the institution's evolution, one can see a mechanism for solving the problems resulting from the constitutional limitation of human reason, from the fact that the human mind can embrace only a narrow circle of complex social reality. The instrumental rationality model dominant in neoclassical economics is a normative model, while the concepts of limited rationality and adaptation developed in behavioral and institutional economics are attempts to describe how a man actually retains and makes economic decisions ".
Protection of competition
"Institutional economics can have a beneficial effect on the protection of competition depending on the relationship between NEI and specific topics on competition protection. The perception of these interrelations leads to the perception that the protection of competition is rooted in a certain institutional order and is part of it ".
- Campbell, J. L. (1998). Institutional analysis and the role of ideas in political economy. Theory and society, 27(3), 377-409.
- Hall, P. A., & Gingerich, D. W. (2009). Varieties of capitalism and institutional complementarities in the political economy: An empirical analysis. British journal of political science, 39(3), 449-482.
- Crouch, C., Streeck, W., Boyer, R., Amable, B., Hall, P. A., & Jackson, G. (2005). Dialogue on ‘Institutional complementarity and political economy’. Socio-Economic Review, 3(2), 359-382.