EOMI chap 1
regulations
crucial for proprer functionning of eco & society
ensure delivery of public G&S in circulat°
institutions
rules
social structures made up of symbolic elements, social activities & material resources
describe the way social world works
formal // informal
formal : political rules, eco rules
informal : taboos, common sense, constraints
ex : IMF, EU, world bank
organizations
players
design of an eco system consisting of decentralized decision making system & coordination in an efficient way
main tasks : coordinate actions of indiv & motivate ppl
fundamental unit of analysis : transaction (minimize)
culture
interculturality
interaction & exchange of culture
multiculturality
fostering mutual understanding
respect & collaboration
among indiv from diverse cultural backgrounds
institut° & orga important role promoting interculturality
foster positive relationships
effective communication
sustainable success
distinguished by
perceptual elements
patterns of cognition
verbal behavior
non-verbal behavior
material objects
markets
game
place where buyers & sellers trade G&S or contracts
challenges
determining property rights
what prices to charge ?
designing accounting system
microeconomics of transition towards market eco includes
creation markets & associated prices signals
privatization
establishment property rights
macroeconomy includes
creation of monetary financial system
consolidat° of the state budgetary process
international trade & finance policies
eliminat° of state trade monopoly
introduction of convertibility of currency
legal system
property law
contract law
bankruptcy law
anti-monopoly laws
labor laws
different legal systems
civil law, common law, customary law, muslim law, mixed systems
economic schools
classical school
neoclassical school
behavioralist
competition
invisible hand
free market, no regulation, no protectionism
indiv not rational so we need to deliberately constrain our own freedom of choice through rules
individuals are rational so leave them alone except when market malfunctions
eco actors driven by self interests
markets self equilibrating
bounded rationality
indiv limited by their cognitive abilities & the info available to them
institutionalist
transaction cost
NIE : new institutionalist eco
price system effective mechanism for achieving efficiency
social improvement, + objective
rationality theory
indiv always make prudent & logical decis° which provide ppl w. greatest benefit of all satisfaction & higher self interest
opportunity cost
cost of making a decision
rationality limited
limited capacity to absorb & treat info
indiv not rational
constrain our own freedom through rules
way to decrease conflicts
by creating rules, hierarchy, procedures to behave
bc ppl think others will act opportunistically
increase efficiency of eco
cost of poduction is the only cost
transaction cost
cost of participating in a market
3 categories
policing & enforcement costs
search & info cost
bargaining costs
motivation cost
coordination cost
communicate info to a central planner who makes all decisions
provide indiv w/ info asymmetries & resources
info asymmetries & imperfect commitment
2 behavioral assumptions (Williamson)
bounded rationality
opprotunism
3 determinants
asset specificity
degree to which an asset is valuable only in a specific use & w/ 1 specific partner
uncertainty
frequency
difficulty measure perf, complexity transaction
when market not efficient --> they emerge in both private / public sector