• University of Exeter Business School
• Module

Institutional Economics

Module description

This module adopts an integrated approach to understanding the behaviour of individuals and organizations and the economic and social relations and transactions they perform. In this module, you will focus on institutional economics to understand how various rules and norms enable, direct and constrain economic behaviour, and to explain the influence of institutions to the economic activity of individuals, groups, firms, and government. In addition to institutional economic literature, the module will also introduce elements of organization theory, public choice theory and economic sociology. You will learn to analyse economic transactions at both the micro and the macro level and develop an understanding of how to conceptualize institutional economic dilemmas.

Module aims - intentions of the module

The module deals with the principles of institutional economics and economic organisation. It introduces students to:

• Institutional economics: how do formal institutions (e.g., laws) and informal institutions (e.g., norms) affect economic behaviour, and how do institutions change over time;
• Transaction cost economics: explains the make-or-buy decision, the choice of governance structure, and the boundaries of the firm;
• Property rights theory: what does it mean to be the owner of an asset and why does ownership of assets matter; which different property regimes exist;
• Principal/agent or agency theory: how does asymmetric information affect transactions             between economic agents; what solutions exist for such problems;
• Implicit contract theory: when is a contract incomplete and how does this affect the efficiency of transactions;
• Behavioural theory of the firm: the strategy of a firm is the outcome of a negotiation process among multiple stakeholders;

Intended Learning Outcomes (ILOs)

ILO: Module-specific skills

On successfully completing the module you will be able to...

• 1. Apply institutional economic thinking to enable students to understand socio-economic dilemmas
• 2. Explain how the institutional environment affect business strategy in both regional and global economy

ILO: Discipline-specific skills

On successfully completing the module you will be able to...

• 3. Conceptualise economic activity and economic behaviour from an institutional perspective
• 4. Analyse the links between current economic problems and economic theory

ILO: Personal and key skills

On successfully completing the module you will be able to...

• 5. Apply problem-solving skills and independent study skills to economic dilemmas and problems
• 6. Use digital tools & resources to create original content and argument in academic and social activities

Syllabus plan

Topics discussed on the module include (not exclusively):

• Introduction to institutional economics
• Transaction cost economics
• Property rights theory
• Principal/agent or agency theory
• Implicit contract theory
• Behavioural theory of the firm

Learning activities and teaching methods (given in hours of study time)

Details of learning activities and teaching methods

Formative assessment

Summative assessment (% of credit)

Details of summative assessment

Details of re-assessment (where required by referral or deferral)

Indicative learning resources - Basic reading

• Groenewegen, J., Spithoven, A. and van den Berg, A., (2010). Institutional Economics: An Introduction. Palgrave Macmillan, UK.

Indicative learning resources - Other resources

• Bowles, S., & Gintis, H. (2002). Social capital and community governance. The Economic Journal, 112(483).
• Coase, R. H. (1937). The nature of the firm. Economica, 4(16), 386-405.
• Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioral economics. The American economic review, 93(5), 1449-1475.
• Masten, S. E., Meehan, J. W., & Snyder, E. A. (1991). The costs of organization. Journal of Law, Economics, & Organization, 7(1), 1-25.
• Meier, S. (2006). A survey of economic theories and field evidence on pro-social behavior. FRB of Boston Working Paper No. 06-6
• Ménard, C. (2004). The economics of hybrid organizations. Journal of Institutional and Theoretical Economics JITE, 160(3), 345-376.
• Ostrom, E. (2008). Institutions and the Environment. Economic affairs, 28(3), 24-31.
• Shelanski, H. A., & Klein, P. G. (1995). Empirical research in transaction cost economics: a review and assessment. Journal of Law, Economics, & Organization, 335-361.
• Simon, H. A. (1991). Organizations and markets. Journal of economic perspectives, 5(2), 25-44.
• Williamson, O. E. (1992). Markets, hierarchies, and the modern corporation: An unfolding perspective. Journal of Economic Behavior & Organization, 17(3), 335-352.
• Williamson, O. E. (2000). The new institutional economics: taking stock, looking ahead. Journal of Economic Literature, 38(3), 595-613.

Key words search

Economics, Institutions, Behaviour