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institutionalists aim at having a wider approach on economic phenomena,
something that besides the economic aspects will cover certain sociological,
anthropological, psychological and other aspects of economic phenomena. The
explanation that they are using while doing this is the one which states that the
economic system is not an isolated system, but it represents a subsystem of the
huge social system and it has interactive relations with its other subsystems.
Institutionalism develops into many directions, the most important being the
following ones: socially-psychological institutionalism, socially-legal institutionalism,
empirical or market fluctuating-statistical institutionalism. All these three
directions have one thing in common and that is the fact that they do not accept the
basic postulates of the neoclassical theory and that they believe that its major flaw
is the fact that it does not explain the motives of people’s behavior. At the same
time they build the attitude that the people’s relationships and their behavior and
the social-economic development are generally determined by the institutions.
Therefore Veblen defines the institutions as ‘established principles which serve as
basis for human’s behavior and human activity in general’ 21 . People accept
institutions as ideas, customs and habits. Private property represents a
medial/central institution, whereas factors such as the population growth and the
development of science cause changes of the institutions.
Institutions are a changeable category and it is their changes that the
behaviour of subjects in society and the social-economic development depend on.
The domain of analysis, when it comes to this doctrine, is not limited to the most
essential economic aspects only. On the contrary, it is in this case also that when
making analysis what is taken into consideration, then appears that they are wider
social, economic and political aspects that influence everyday life. What is also
subjected to analysis are the wider issues from the field of law, applied industrial
organization, public policy and other fields.
Neoinstitutionalism enlarges the scope of neoclassical economy by
incorporating the property rights and contractual relations in the analysis, and it is
with their help that it explains the behaviour of the economic subjects. Therefore,
this theory observes “… the firm as a complex set of relations and interactions that
largely depend on the institutional economy in which they function.” 22 Neoinstitutionalism
appears as a kind of criticism against neoclassical conception.
According to neo-institutionalists, the assumptions of neoclassical doctrine are not
absolutely true and appear to be applicable only in a special condition. Neoinstitutionalists
do not oppose these assumptions; they only state that they are
incomplete and that they do not reflect the real condition of the economies all over
the world. “In the real world, the producers and the industries go that far that they
set up the price, they determine the demand by using the monopolies as means for
21
Metodija Stojkov, Development of Economic Thought (in Macedonian), Faculty of Economics,
Skopje, 2002, p. 245.
22
Shenaj Dayt, The New Institutional Economy and Economic Development, M.Sc. paper
(unpublished, in Macedonian), Faculty of Economics, Skopje, 2007, p. 8.
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