Institutional is what? What is the essence of the institutional economy?
"Institutional" is a word that is very often heard about the economy. However, not every person knows exactly what it means. But it should be understood that this word, as well as related expressions and statements, play a very important role in modern life, and also had great importance in the past, in the process of improving production and consumer relations. The concept of "institutional" is what began the development of the modern economy in the form in which it can now be observed. So what does it mean?
Meaning of the word
So, first of all it is necessary to understand the meaning of this term. Institutional is an adjective that describes something that is directly related to public institutions and has a direct relationship to them. This is the main meaning of this word, which underlies the well-known movement of the economy, which is better known as institutionalism. However, this will be discussed a little later, and now it is worth considering the second meaning of this word.
Institutional is one that is officially established and fixed in its social status. That is, institutional relations are those relationships that are actually fixed, perhaps even at the legal level.
As you can see, there are two main meanings of the mentioned word, but still the first is used much more often and has received impressive publicity due to what was written above. Institutionalism is a direction in the economy, which we will discuss later.
And what is the institutional economy? It is an extensive theoretical school that focuses on the consideration of the influence of social institutions such as the state, law, morals and so on on the economic activities of society as a whole and on the adoption of concrete economic decisions in particular.
It originated in the early twentieth century, and the term "institutional economy" was introduced in 1919. Until now, the named school has a serious influence and is one of the most recognized in the world.
The institutional approach is what lies at the very heart of institutionalism. Strictly speaking, he considers two aspects - institutions and institutions. The first concept implies the norms and customs of people's behavior in modern society, and under the second - about the same, but only fixed at the legislative level, that is, laws, official rights, as well as organizations and institutions.
If to generalize, then the difference between the institutional approach and other economic approaches is that its proponents propose to consider not only the economic categories and processes themselves, but also the social non-economic factors affecting them, such as institutions and institutions.
Direction of thought
The social-institutional direction of thought has a number of its distinctive characteristics. For example, supporters of this approach criticize the abstract and formal nature of the neoclassical economic analysis that was characteristic of this science before the emergence of institutionalism.
Also, one of the main distinguishing features of this line of thought was the interdisciplinary approach. As you could already understand, the institutionalists advocated that the economy should not be considered by itself, but integrated with the humanities. At the same time, they sought empirical and factual research, an analysis of pressing pressing problems, and not universal questions.
Institutional changes, which also have a different name - institutional development - is a process of transformation, which is quantitative and qualitative. These processes are carried out in cooperation with a variety of institutions - political, economic, social and so on. And the institutional environment is one where these metamorphoses pass, but they are not manifested in changes in rules and laws, but at the level of different institutions.
Well, the last thing to talk about is the institutional structure. What it is? As the school of institutional economics says, it is an orderly set of institutions that influence the economic behavior of people, communities, groups, enterprises, and so on. At the same time, certain economic matrices are formed, which create restrictions on the activity of a particular economic entity. Naturally, all of the above happens within the framework of a specific system of coordination of economic activities. Simply put, this is the same institutional environment in which the changes described in the previous paragraph occur.
Naturally, this is not all that the school of institutionalism consists of. In it there is still a huge number of concepts, methods, approaches, movements, and so on. However, it is the listed basic terms that will help you get a general idea of the named form of the economy as such, and also directly about the very word "institutional", which has been one of the foundations in the field of economic theory for almost a century.
This term is very important for every person who wants to have a good understanding of the whole set of relations in the system of production, consumption, distribution and exchange, since many modern movements and concepts in this sphere are connected with it.