ABSTRACT
The new institutionalism represents an attempt to build a coherent account of institutions from micro-foundations. It seeks to apply to non-market institutions the same forms of reasoning that neo-classical economics has applied to the analysis of markets. Focusing on the law, property rights, bureaucracies, and other non-market structures, the new institutionalism seeks to demonstrate how rational individuals might employ non-market institutions to secure (in equilibrium) collective levels of welfare that they otherwise might not be able to attain, given their responses to market incentives. When applied to the study of development, the new institutionalism focuses on sources of growth hitherto ignored by market-oriented forms of economic reasoning: those arising from the institutional setting within which economic activity takes place.
