ABSTRACT
Increasingly, economists as well as other social scientists have realized that the orthodox neoclassical paradigm cannot explain people’s real world correctly since neoclassical theories1 of exchange pay no attention to the role of non-market (nonprice) institutions such as trust, networks, social capital, indigenous governance, etc., under the situation of positive transaction costs (Granovetter 1985; Etzioni 1988; Hodgson 1988; Casson 1991; Herrmann-Pillath 1994; Landa 1997; Nooteboom 2002; etc.). Thus, they created new approaches to either fi ll the gap between reality and conventional economics, or sought to correct this shortcoming. A consensus emerging from their research is that institutions matter for economic performance and social development, and that human societies depend on two sets of institutions (market institutions and non-market institutions2) rather than just one type of institutions (market institutions).
