Institutional Economics:

The term 'institution', in general, refers to a set of rules or an established law or custom governing the behavior of persons in a society. For instance, in the context of discharging public services, organizations like schools, hospitals. banks, etc. are institutions established for meeting their specific needs to the society. As economic exchange can efficiently take place in an atmosphere of well-established quality institutions, their importance in aiding development is recognized by contributors from all genres. However, the emphasis laid in assigning institutions a due place are varied among the different schools of economic thought. In the light of this. literature in the field of 'institutional economics' distinguishes between two separate schools: original/old (i.e. earlier) institutional economics (OIE) and new institutional economics (NIE).

Beginning with a background on the main differences in the approach of the institutional economics from that of the neoclassical economics, the present unit discusses the following four basic aspects in this field: the nature and type of institutions, the thrust of NIE in respect of some major factors, a classificatory framework serving as boundaries of distinct areas coming under the scope of NIE, and the concomitance with which institutional development is viewed with economic development in general.