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Über dieses Buch

This collection of essays comprises some of Rudolf Richter’s important contributions to research on New Institutional Economics (NIE). It deals with the central idea, principles, and methodology of New Institutional Economics and explores its relation to sociology and law. Other chapters examine applications of NIE to various microeconomic and macroeconomic issues in the face of uncertainty, from entrepreneurship to the euro crisis.

Inhaltsverzeichnis

Frontmatter

Chapter 1. The New Institutional Economics: Its Start, Its Meaning, Its Prospects

Abstract
This chapter deals with the early stages, meaning, and prospects of a field known under the name of “New Institutional Economics”—a generic term introduced by Williamson (1975, 1). It soon became a standard (or banner) under which a diverse group of economists who shared one common intellectual position assembled: institutions matter, the relationship between institutional structure and economic behaviour requires attention and the determinants of institutions can be analysed with the aid of economic theory.
Rudolf Richter

Chapter 2. Uncertainty in Economic Theory from the Perspective of New Institutional Economics

Abstract
Keynes accused “… classical economic theory of being itself one of these pretty, polite techniques which tries to deal with the present by abstracting from the fact that we know very little about the future.” Keynes concedes classical economics would not rule out change; they would assume, however that risks are “capable of an exact actuarial computation.” As a result, the calculus of probability would “…be capable of reducing uncertainty to the same calculable status as that of certainty itself; …” (loc. cit. 112 f.). Arrow (1953) with his time-state-preference theory, developed a model of this type, which Debreu (1959) later integrated into his axiomatic presentation of general equilibrium theory. In the perfect futures economy of Arrow and Debreu each can maximize the present value of its expected utility. Assumed is perfect foresight, meaning all individuals know from now on to the Last Day all possible states of the economy and their stochastic properties. No surprises can happen. Of course, these are extreme assumptions.
Rudolf Richter

Chapter 3. New Economic Sociology and New Institutional Economics

Abstract
This article deals with similarities and differences between the New Economic Sociology (NES) in below explained sense and the New Institutional Economics (NIE) as described in the previous chapter. As we shall see, both deal with social actions. What are then the differences between the two fields—the fundamental differences that is—or are there none?
Rudolf Richter

Chapter 4. The Role of Law in the New Institutional Economics in Comparison With the Economic Analysis of Law

Abstract
To describe the role of law in the new institutional economics (NIE), we compare this approach with the economic analysis of law (EAL) of the 1970s when the NIE evolved. At that time the EAL was dominated by the “Chicago” or “market-based” approach that builds on the theory of perfect competition. Contracts are complete and Pareto efficient (allocative efficient). Ten years on, informational economic models that are briefly touched upon here extended this approach. After a few methodological considerations, this chapter concentrates on the Williamsonian branch of the NIE, i.e., the transaction cost approach (TCA). This theory argues that, in the real world of positive transaction costs and limited foresight, adaptation to the unforeseen becomes a central issue. Incomplete contracts can at most be “adaptive efficient” (North 1990, p. 80). The governance structure of contracts matters and becomes a bargaining point. Court ordering has to be complemented or substituted by private ordering. Attentive actors come to terms on a governance structure that protects them against ex post opportunistic manoeuvres of their opponents. Generic governance structures are (according to Williamson) markets, hybrids, and hierarchies. Court ordering works best for market governance. In the case of hybrid modes (franchising, leasing, etc.), courts would mainly be supplanted by private ordering between the parties. As for hierarchies, courts would stay out of conflict resolution (fraud and conflict of interest excepted). While the objects of research in NIE and EAL remained different, the latter’s methodology appears to move closer to that of NIE.
Rudolf Richter

Chapter 5. Entrepreneurs as Surrogate Forward Traders of Goods and Services, Seen from the Viewpoint of New Institutional Economics

Abstract
Only a few goods are traded forward, because, as Hicks (1946, p. 139) explains, ‘[…] it is uncertainty of the future and the desire [of the consumer] to keep one’s hands free to meet that uncertainty, which limit the extent of forward trading under capitalism.’ Most forward markets for consumer goods fail. The cause is—from the perspective of New Institutional Economics (NIE)—the presence of positive transaction costs, imperfect individual foresight and bounded individual rationality. The unspoken assumption of classical economics is that private firms and their managers or entrepreneurs serve as surrogate futures traders of goods and services. They decide ‘today’ what, where and how much will be produced for ‘tomorrow’ and, in that context, what, etc., factor inputs should be bought ‘today’ for that purpose. The reason why the price mechanism is superseded by ‘the firm’, whose ‘entrepreneur-coordinator’ directs production, is transaction costs or the ‘cost of using the price mechanism’ (Coase 1937, p. 390) and, according to the reading of Williamson (1975, p. 4), ‘[Knightian] uncertainty and, implicitly, bounded rationality’. The latter two include the costs of adapting to unforeseen events and of repairing errors resulting from bounded rationality. Anyway, transaction costs, imperfect foresight and bounded rationality require suitable institutional arrangements and ‘[…] some authority (an “entrepreneur”) to direct the resources’ such that ‘certain marketing costs’ are saved. Coase continues:
Rudolf Richter

Chapter 6. The Euro Crisis from the Perspective of the Preceding Debates on Fixed Versus Flexible Exchange Rates and the European Currency Union

Abstract
To clarify right from the outset: The introduction of flexible exchange rates and the establishment of European Monetary Union are not the consequences of applying economic expertise. The first is a consequence of the normative power of facts: the breakdown of the Bretton Woods System in 1973; the latter a consequence of political wisdom or shrewdness: the Maastricht Treaty of 1992. All economists did was to provide the arguments to rationalize flexible exchange rates (after the breakdown of the Bretton Woods System) and its opposite (absolutely fixed rates) in case of the European Monetary Union. Both should be seen together.
Rudolf Richter

Chapter 7. Why Price Stability? A Brief Answer from the Perspective of the New Institutional Economics

Abstract
The concept of general price stability became only a topical issue of famous monetary theorists around 1,900. Naturally, people knew that a stable gold price was not equivalent with general price stability, and there was also talk about the relation between new discoveries of gold deposits and general price increases. Missing was, though, a general measure of the price level and, as a result, of general price stability. Index calculation began only to prevail during the second half of the nineteenth century (Pfanzagl 1955). The today worldwide used Laspeyres and Paasche indices appeared in the Jahrbücher für Nationalökonomie und Statistik of 1871 and 1874 respectively.
Rudolf Richter

Chapter 8. Bridging Old and New Institutional Economics: Gustav Schmoller, Leader of the Younger German Historical School, Seen with Neoinstitutionalists’ Eyes

Abstract
Economics is occasionally a rather nationalist undertaking. When Douglass North was honoured, at the 1995 AEA meeting, with a special session entitled “Douglass North and the New Institutionalism: A Bridge to the Old Institutionalism” the bridge was only extended to old American Institutionalism as represented by Veblen or Commons. The German Historical School was not mentioned, nor the name of Gustav Schmoller, whom Schumpeter (1926, p. 355) described as the “father” of American Institutionalism, not to speak of the later work by Max Weber or Walter Eucken .
Rudolf Richter

Chapter 9. German “Ordnungstheorie” from the Perspective of the New Institutional Economics

Abstract
Ordnungstheorie (~ system theory, ordo theory) and New Institutional Economics have opposing objectives: The objective of Ordnungstheorie is the “…scientific understanding of real economic life”, given the institutional framework (economic system or “order”) within which economic life happens, while the objective of the New Institutional Economics is the economic analysis of the institutional framework of the economy itself (its “order”). That is, in spite of their different objectives, the two approaches have one common point of interest: the institutional framework of economic life. For that reason it may be of interest to neoinstitutionalists to have a closer look at German Ordnungstheorie.
Rudolf Richter

Chapter 10. Methodology from the Viewpoint of an Economic Theorist: Fifty Years On

Abstract
Modern political economy, as part of social sciences, has been started by Scottish moral philosophers, among them David Hume with his Treatise of Human Nature (1740). He treats, what is called today, the problem of social control under the assumption of egoistic behaviour of individuals. What got lost in classical economics (as defined by Keynes 1936) was that Hume started essentially from the problem of future uncertainties of individual human beings. How are human individuals able to deal with future uncertainties despite their physical weaknesses? Comparing humans in the state of nature with animals, Hume (1739/1740, 1984, 536 ff.) writes:
Rudolf Richter

Backmatter

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