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New Institutional Economics and Economic Development: A Smithian Critique

New Institutional Economics and Economic Development: A Smithian Critique
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Author(s): Manolis Manioudis (University of Crete, Greece & Institute of Commerce and Entrepreneurship (IN.EM.Y. of ESEE), Greece) and Giorgos Meramveliotakis (Neapolis University Pafos, Greece)
Copyright: 2021
Pages: 14
Source title: Bridging Microeconomics and Macroeconomics and the Effects on Economic Development and Growth
Source Author(s)/Editor(s): Pantelis C. Kostis (National and Kapodistrian University of Athens, Greece)
DOI: 10.4018/978-1-7998-4933-9.ch002


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In recent years, the concept of “institutions” has become central in scientific and political discourse. This reflects an increasing awareness of the role of institutions in the functioning of economies and in economic development more generally. Many of the catchphrases articulated within new institutional economics such as “institutions,” “organisations,” “transaction costs,” “property rights,” and “contracts” have become very common in orthodox economics discourse. This development is intellectually stimulating and interesting because it raises some fundamental issues with regard to the role and functioning of institutions. These concepts are seated on Smith's idea of the “harmony of interests.” However, Smith sees power as dominant in the formation of institutional framework. This chapter aims to provide a Smithian critique based on the notion of power, arguing that the formation of institutions and institutional framework cannot be considered apart from the intrinsic power relations which are vested in society.

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