New Institutional Economics

New Institutional Economics (NIE) builds on Institutional Economics by emphasizing the role of institutions—rules, norms, and organizations—in shaping economic behavior and outcomes. It examines how these institutions influence decision-making and efficiency in markets, factoring in the costs of transactions and the importance of property rights. Unlike traditional economics that often assumes perfect information and rational agents, NIE acknowledges that individuals operate within institutional frameworks that affect their choices and actions, leading to variations in economic performance across different societies and historical contexts. In essence, NIE blends economic theories with insights from sociology and political science.