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Policy Relevance of New Institutional Economics?: Assessing Efficiency, Legitimacy and Effectiveness

October 25th, 2013 humas No comments

Oleh: Eva Lieberherr (EPFL)

Policy Relevance ...

Neoclassical economic theory played a central role in the public policy shift from the monopoly paradigm with strong government intervention to the liberalization of utility sectors in the early 1980s (Groenewegen 2005; Geradin 2006; Guthrie 2006). Yet the removal of governmental interferences and the devolvement of public sector activities to private contractors has not produced consistently successful results (Williamson2000; von Weizsacker, Young et al. 2005; Schouten and Pieter van Dijk 2007).

Institutional economists argue that this lack of achievement is in part due to the reliance on neoclassical economic theory, which focused on economic coordination via the price mechanism and production efficiency while ignoring considerations such as rules, behaviors and social norms (Coase 2000; North 2000; Joskow 2008).

Their argument suggests that since lessons learned from new institutional economics (NIE) can provide valuable insights into public policy-making (specifically the process of restructuring), NIE should therefore have more clout in public policy-making (Joskow 2008). NIE is indeed gaining widespread attention in social science literature as it is becoming a more mainstream subject (Joskow 2008). Particularly with respect to liberalization of utility sectors, NIE is increasingly used to analyze modes of economic coordination (Rothenberger and Truffer 2003; Finger, Groenewegen et al. 2005).

Download: Eva Lieberherr, Policy Relevance of New Institutional Economics?: Assessing Efficiency, Legitimacy and Effectiveness