Institutions and History Flashcards

1
Q

Economic Institutions

A
  1. Well established arrangements and structures that are part of the culture or society (formal: laws, informal: social norms)
  2. Specific agencies or foundations, either government or private devoted to collecting or studying economic data: commissioned with the job of supplying a good or service or implement policies that are important to the economy (Bank of England)
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2
Q

Traditional Economic Theory

A

Outcomes are supposed to be independent of the institutional structure

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3
Q

Path Dependency

A

Where we start from matters to where we end up and institutional structure affects the path.

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4
Q

Capitalism

A

Economic system characterized by a specific combination of institutions that started around the Industrial Revolution
- Capitalist economy combines: private property, markets and firms

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5
Q

Economic System

A

A way of organizing the production and distribution of goods and services in an entire economy

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6
Q

Institutions

A

Different set of laws and social customs regulating production and distribution in different ways to participants of the economy

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7
Q

Private Property

A

The right that one can enjoy one’s possessions in way’s on their own choosing excluding others from the use if they see fit

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8
Q

Markets

A

A way of connecting people who may mutually benefit by exchanging goods or services through buying or selling

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9
Q

Firms

A

A business organization which pays wages to employ people and purchase inputs to produce and market goods and services with the intention of making profit

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10
Q

Impact of Technology

A

Firms competing in markets have strong incentives to develop and adopt new tech

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11
Q

Specialization

A

The growth of firms and expansion of markets linking the entire world allowing for historically unprecedented sepcialization in tasks and production

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12
Q

Economic Conditions

A

Firms, private property or markets may fail (in capitalist economy)
- Competitive markets etc

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13
Q

Political Conditions

A

Capitalist institutions are regulated by the gov.
- Gov providing infrastructure, education, etc
- Taxation and other interventions
- Laws and regulations

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14
Q

New Institutional Economics North’s Argument

A

Neoclassical theory is inappropriate in analysing and prescribing policies that will induce development
Idea of rationality should be modified
- Two assumptions made: - time and institutions dont matter
:- Institutions form incentive structure of a society
:- Time is the dimension in which the learning processes of individuals shape the way institutions evolve
- Neoclassical results of efficient markets only obtains when it is costless to transact

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15
Q

New Institutional Economics

A
  • Shows importance of transaction costs
  • The cost associated with exchange of goods or services and incurred in overcoming market imperfections
  • The structure of the institutions determine the transactions costs
  • Explains path dependency
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16
Q

One size fits all policies and post-communism Russia

A
  • Formal rules can change quickly but not informal ones
  • Economies that adopt formal rules of another economy will have v diff performances because of informal norms
  • ^ Cannot apply western solutions to former communist countries and have same outcomes - changing social norms is a lengthy process