Institutional Economics: How Rules, Norms, and Power Shape Markets

Institutional economics begins with a simple observation: every market is built. Property rights, contracts, corporations, unions, central banks, and everyday habits decide who can trade what, on what terms, and who bears the risk. Change the rules and you change the outcome.

The tradition has two great branches. The "original" institutionalists, Thorstein Veblen, John R. Commons, and later John Kenneth Galbraith, studied how habits, technology, and power evolve over time. The New Institutional Economics of Ronald Coase, Oliver Williamson, and Douglass North brought transaction costs and property rights into the mainstream. Elinor Ostrom, who won the Nobel Prize in 2009, showed how communities govern shared resources without either a market or a state taking over.

You will study both branches, see where they agree and disagree, and learn to use institutional analysis on the questions you care about, from corporate governance to development to climate policy.

Critics say the original institutionalists described more than they predicted, and that "institutions matter" can explain everything and nothing. New Institutional Economists answer with formal models and data, while the original tradition argues that the new branch kept too much of the standard model. You will weigh both sides and the growing body of empirical work on institutions.

Elton's program is pluralist: your professors help you understand each school on its own terms, weigh it fairly against the evidence, and reach your own conclusions.