Institutional Economics

Course Objective

After successfully completing the course, the student should be able

1. to understand what institutions are and how institutions impact the behavior of economic actors,
2. to think self-reflectively, including with the use of formal theoretical models, about the role of institutions in social life,
3. to critically and creatively develop and articulate their own view about the role of (some) institutions in social life, and
4. to collaboratively construct, articulate, and interrogate questions about the role of institutions in social life that they themselves find significant.

Course Content

All economic activity takes place within (historical) institutions that both constrain and are produced by human activity, thereby affecting the production, distribution, and availability of resources. This course introduces what is known as institutional economics: a discipline commonly partitioned into old and new institutional economics. Following a dialectical structure, the course starts with approaches from new institutional economics (NIE), which are then self-critically problematised using discussions from old institutional economics (OIE). The overarching theme of the course is the tragedy of the commons, which, according to NIE, occurs ubiquitously whenever self-interested individuals interact over the use of resources held in common. We shall see how NIE deals with such situations, including through the use of formal, explicit rules (like constitutions, laws, and property rights) and informal, implicit rules (like social conventions and norms). In the second part of the course, we turn our gaze to OIE and what we can learn from it with respect to the ubiquity and history of the tragedy of the commons, the management of resources and populations, and the sources of value and wealth.

Additional Information Teaching Methods

The course uses lectures, seminars, as well as bonus practical sessions devoted to creating simulations of some of the phenomena discussed in the course.

Method of Assessment

The final grade for the course is a weighted average of the following elements:

1. 30%: Common-pool resource group assignment: A NIE analysis (course objectives (1), (2), and (4)).
2. 30%: Common-pool resource individual assignment: An OIE critique (course objectives (1), (2), and (3)).
3. 40%: Simulation individual assignment (course objectives (2) and (3)). This is broken down into three steps, including a formative individual meeting, to help students progress in their work.

All three types of assignments are AI Level 1, which means that the use of AI is not allowed at any point during the assignment. The substantive reasons for this policy will be explained at the start of the course.

A necessary condition for passing the course is (i) the attendance of at least 75% of the seminars and (ii) completing any seminar activities assigned by the seminar instructor.

A sufficient condition for passing the course is a final weighted-average grade of 6.00 (a weighted-average grade between 5.50–6.00 is rounded up to 6.00).

Literature

Most of the formal models are discussed in Samuel Bowles. 2004. Microeconomics: Behavior, Institutions, and Evolution. Princeton University Press. Particularly, chapters 1, 2, and 4.

Students will also read work by, among others, Walton H. Hamilton, Elinor Ostrom, Garrett Hardin, and Thorstein Veblen.

Additional Information Target Audience

Second-year PPE students.

Additional Information

Please note that, according to the standard PPE policy, participation in the seminars is compulsory.

Explanation Canvas

All the relevant information will be provided on Canvas and students are expected to keep track of the Canvas syllabus page on a regular basis.

Recommended background knowledge

There are no additional prerequisites beyond the standard compulsory first-year PPE courses (particularly, ‘Methods of PPE I’ and ‘Foundations of Microeconomics’). Courses in the PPE specialisation track ‘Economics’ are helpful.