ABSTRACT
New Institutional Economics (NIE) is an expansion of neo-classical economic theory. Its merits stem from the fact that it has identified efficient institutions to be a prerequisite for development. Yet, as neo-classical economics is increasingly rejected as a useful basis for social analysis, the prominent role of NIE in development will probably diminish over time. However, NIE still strongly inf luences development policy. Thus, it is useful to understand the theoretical context of NIE as well as its shortcomings.
