The New Institutional Economics

The New Institutional Economics (NIE) is a framework that studies how institutions—like laws, norms, and organizations—impact economic outcomes. It emphasizes that the rules governing interactions shape economic behaviors and decisions. By examining the costs related to transactions, such as negotiating and enforcing contracts, NIE helps explain why some economies succeed while others struggle. It integrates insights from economics, law, and sociology, suggesting that strong institutions can reduce uncertainty and foster trust, ultimately promoting economic growth and efficiency.