Chapter 1: The New Institutional Economics and Natural Resource Management
1 In the last two decades, economists and other social scientists have realized that institutions, deﬁned as humanly-devised rules, signiﬁcantly shape human behaviour. This realization has led to a new ﬁeld of study called New Institutionalism. In the context of economics, the term ‘institution’ does not refer to organizations such as financial institutions, business corporations or government agencies. Rather, organizations are founded on and operate according to their institutional framework. North (1994) succinctly writes that if institutions are the rules of the game, then organizations and their entrepreneurs are the players. Institutions consist of either internal constraints (for example, taboos, customs) or external rules (for example, constitutions, laws). Internal institutions, often called informal institutions, are rules that have evolved spontaneously through experience and learning. External institutions, sometimes referred to as formal institutions, are designed, imposed and enforced from above by a political authority. North (1991) comments that formal or 1 2 Institutional economics and ﬁsheries management informal institutions exist to govern almost all situations of exchange and transformation. The study of institutions within economics is concerned with one particular subset of human exchange and transformation: that of economic exchange and the allocation of resources and consumer goods and services. Veblen (1909) and Coase (1937, 1960) were the first to write of institutions, although the new institutional economics grew in inﬂuence after the work of Williamson (1979, 1985, 1998), Williamson and Masten (1999), Matthews (1986) and North (1991, 1994). Gordon (1954) may have been the ﬁrst to investigate...
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