Conclusion This book aims to contribute to the literature of macroeconomics by helping to define the framework of new development economics. It starts by providing an overview of earlier development theories and explains the need for an institutional approach to understand economic development. It adopts a positive approach to analyzing the relationship between institutions and development; to this end, issues regarding the measurement of institutional attributes and the empirical estimations that involve those measures are discussed at length. The book also proposes a formal model of institutional evolution. Using the NDE framework, it proceeds to provide theoretical discussions and empirical evidence on the effectiveness of institutions of fiscal- and monetary-policy making, two main sets of instruments available to governments for affecting socioeconomic outcomes. A wide scope of developmental issues can be analyzed within the framework of NDE which combines the theories of transaction cost and collective action with a dialectical perspective. Understanding the circumstances under which specific institutions can form and affect socio-economic outcomes would enable policy makers to identify feasible and effective sets of developmental agendas. Not all the policies out of a set of feasible policy options can achieve a country’s developmental objectives given an existing set of institutions at a given episode. Informal aspects of institutions usually have a life of their own, almost following a natural order; they often emerge and evolve due to structural factors that are beyond the governments’ control. Policies adopted by governments need to respect this natural order, 140 Conclusion 141 but...
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