ABSTRACT
This chapter deals with a discussion of New Institutional Economics (NIE) and its core components, including of political economy. NIE is a relatively new multidisciplinary sub-field of economics that blends theory and practice from many fields of study, including economics, organizational theory, political science, law, public policy, and others. A related concept to information asymmetry is the Imperfect Information Paradigm, which states that economic analysis is conditioned by information that is imperfect because it is asymmetric and incomplete. The credibility of the commitment is relevant in economic exchange as well as public policy because it enables complex contracting to be realized as it helps bind the parties in a transaction to agreements. The sooner policy makers recognize this as inherently given, the quicker we can posit the central policy narrative that all economic agents are constrained in a fundamental manner.
