A Fragile Alliance
- New Horizons in Institutional and Evolutionary Economics series
Chapter 2: Political economy revisited
Modern economics emphasizes the concept of scarcity. The object of the science of economics is the way in which society deals with scarce resources. In this view, economics is an aspect science. However, as we have seen in Chapter 1, the functioning of an economy requires regulation. If the scope of economics is on the allocation of resources only, it is often implicitly assumed that the prevailing institutions are adequate. After the Great Transformation, the economy is out there on its own. In this context, North, Wallis and Weingast (2009, p. 112) argue: ‘An important property of open access orders is the seeming independence of economic and political systems’. Economic organizations need not participate in the political process to secure their rights. Contracts can be entered freely. If necessary, execution can be enforced. The raison d’être of organizations is not based on privileges, while the probability of expropriation is equal to zero.
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