The roots of New Istitutional Economics can be traced back to two famous articles written by the great academic Ronald Coase, in the early 20th century. These two artices “The nature of the firm” (1937) and “The Problem of Social Cost” (1960) brought to light the significance of transaction costs and property rights for the institutional structure and functioning of the not only the firm but the economy in its whole. Many more have elaborated upon and followed in Ronald Coase footstep by emphasizing the role of the firm, the organizational structure and the institutional environment, as important variables when analysing development and growth.
Although the roots of NIE can be traced back almost a hundred years the concept itself is quite young. The term “New Institutional Economics” was introduced the first time in 1975 in a book by Oliver Williamson which includes aspects of micro theory, economic history, economics of property right and industrial organization. The term was also mentioned in 1980 in the New York Times and it was heralded as a new direction in the field of economics research. In 1983 the first international conference of NIE was organized and have since then been held annually.
Other notable articles and scientists in the field include Williamson who in 1971 wrote and highlighted the role of transaction costs in the study of vertical integration where he showed that the contract was a key element; Davis and North who in that sme year published an influential book called “Institutional Change and American Economic Growth”; and Kenneth Arrow who wrote about the “The limits of Organization” in 1974. All these articles are considered essential pieces of work in NIE.
In 1997 the “International Society for New Institutional Economics or ISNIE was created. On that occasion Coase said that NIE was not an attack on neoclassicism but rather an attempt to make the field of economics more fruitful.
New Institutional Economics 