Institution economics

I spent some time during my masters studying institutions and the economic effects that institutions have. By institutions, I mean established ‘laws and practices’ as much as governing rules, systems in place that organises economic activities. These rules and practices have huge impacts on economic development.

Acemoglu et al (2001) was a famous study on the long-lasting effects of institutions and on the economy. I thought it was interesting to take a bit more of a meta view on these topics and discover the forces that sometimes lurks in the background in ways we don’t realise.

Our state of the markets and the economy needs to be thought through the lenses of the institutions we have evolved, the incentives around them rather than just short-term fire-fighting. The shortest route to the near-term outcomes we want does not ensure the outcomes persist. And because these days we tend to think that we can monitor and dynamically ‘guide’ things to a desired outcome, the more we create unnecessary build-up of tensions as we choose to ignore the impact of current institutional structures we have laid down. These we must not ignore.