THE POVERTY OF NEW INSTITUTIONAL ECONOMICS

Abstract

Since the early 1990s at least, development theories and policies have increasingly come to emphasize the importance of institutions. One significant approach is the New Institutional Economics (NIE), which emphasizes how institutions can reduce the costs and uncertainty involved in transactions, and thereby enable trade, growth and poverty alleviation. NIE, however, is rooted in social science paradigms of evolutionism and functionalism. These paradigms suffer from a number of methodological, theoretical and empirical problems, and, as a result, contain inaccurate assumptions of bounded, homogenous and inertial communities. Consequently much NIE also rests upon these assumptions. These assumptions are illustrated in one particular application of NlE-the analysis of sharecropping, with a case study of Ghana. www.udsspace.uds.edu.gh