Institutional form (blueprints) and institutional function (process)

Abstract

This paper is concerned with the question how we should understand cases on property rights in general, and on land economics in particular, in which a remarkable level of growth (or other measures of institutional performance) is combined with so-called ‘perverse’ institutions. That is to say institutions that are not proposed by the neoliberal politics, in which the insights of mainstream economics (orthodoxy) and especially the economics of property rights and related market policies based on formal competition and corporate laws, figure prominently. This approach works out of the idea that societal objectives can be realized by following the blueprint of establishing the ‘right’ institutions, so the behavior of the actors in society is incentivized in the right direction and the societal objectives such as efficiency, innovation, and economic growth are realized. In this approach economic policy is about creating the right institutional form of the economy according to the “blueprint” of neo-liberal politics, which is based on mainstream economics, also known as neoclassical economics (NCE), or orthodoxy. This paper will review various theoretical positions that might substantiate or provide credence to an alternative view based on the function of institutions.