Keywords: New Institutional Economics Development Economics Institutional Economics, its ideological origin is1the German school of history in the 9th century, which was produced as a school in the early 1920s. After it came into being, it went through three stages: from the end of 19 to the 1930s, the period of old institutional economics represented by Van Buren, Kang Mangsi and Mitchell; From 1930s to 1940s, the period of transition from old institutional economics to new institutional economics represented by Burleigh, Means and Galbraith; Since 1950s, the period of new institutional economics represented by Coase, North and Williamson. [1](p.3) The new institutional economics thought and analysis method in the third stage have the greatest influence on development economics.
This paper will be divided into three levels. The first level introduces the dilemma of development economics and the rise of institutional analysis. The second level expounds the perfection of development economics after introducing institutional analysis. The third level looks at the future development of development economics from the defects of institutional analysis methods.
First, the plight of development economics and the rise of institutional analysis methods
With the independence of a number of colonial countries after World War II, development economics came into being. Development economics has been closely related to the economic development practice of developing countries since its birth, and its explanatory power to the reality of developing countries and the practical effect of its policy propositions will directly determine the development fate of this discipline. From the late 1940s to the early 1970s, structuralism started from the "structural rigidity" of developing countries and put forward the "state control dogma" of "capitalization, planning, industrialization" and "trinity" (in Lahore's words). Although some countries experienced initial short-term growth due to the implementation of policies, the vast number of developing countries eventually fell into the consequences of agricultural stagnation, industrial depression, rent-seeking, secondary differentiation of dual structure and weak economic development.
Moreover, while structuralism is developing in the direction of macro theory based on the special national conditions of developing countries, its theoretical basis is still in the traditional western mainstream economics, and it consciously or unconsciously puts forward its own ideas and policy propositions with reference to the development experience of developed countries. In short, the research on the reality of developing countries is not carried out at the micro level, and structuralism eventually leads to the disharmony between the micro and macro of development economics, which affects its overall consistency and perfection. The dual defects of theoretical construction and policy practice eventually make the development economics dominated by structuralism gradually lose its development momentum.
Neoclassicism, which emerged in the fierce attack on structuralism, holds that people in developing countries will respond flexibly to the price mechanism under the strict assumptions of established system, zero transaction cost and complete information, just like people in developed countries. As long as developing countries give full play to the role of "invisible hand", economic development will be realized automatically. Since the "price-market" mechanism can solve the problems of developed and developing countries at the same time, there is no need for independent development economics. Under the impact of neoclassicism "single economics" (in haberler), development economics is in danger of "dying".
In fact, as Nicholas Ardito-Baleta pointed out, "In the past, the key reason why economists could not fully explain economic growth was that the fourth factor-institution-was ignored." [2](p.2) Whether it is structuralism or neoclassicism, their * * * same defect is that they all ignore the decisive role played by the system in economic development and fail to see the institutional defects in developing countries, which not only damages economic efficiency, but also makes it impossible for the economy to develop continuously.
In the early days, some economists realized the important role of institutions in economic development. For example, when analyzing the source of economic growth, Lewis pointed out that technological progress is the superficial reason, while the enthusiasm for technological innovation stimulated by land system, property right system and patent system is the deeper factor. His analysis of the dual structure clearly explains the imbalance of various economic systems in developing countries. Muerda discussed the cumulative causal effect of circulation in many developing countries, revealed its institutional roots, and proposed that only by innovating the rural land system can we get rid of the vicious circle and move towards a virtuous circle. Kuznets' historical statistics of a large number of low-income countries and Rostow's analysis of "traditional society" also reflect the characteristics of political structure, legal system and social and cultural integration, and point out that institutional defects are the fundamental reason for the economic backwardness of developing countries. But in the eyes of these scholars, institution is a category that is difficult to analyze strictly. They only described and enumerated a large number of phenomena, but did not form a system in institutional research. [3] (p. 362) Development economists of the radical school have also noticed the influence of institutional factors on the economic development of developing countries, but more from the perspective of class.
It was after 1980s that the institutional analysis method really had a great impact on development economics. A group of scholars, such as V Ostrom, D Fini, H Picht, etc. The new institutional economics analysis method initiated by Coase and North challenges the traditional economic thought of explaining economic growth with resources, technology and people's preferences, and provides a new perspective for development economics. In a short period of more than ten years, the analytical method of new institutional economics has aroused great concern of development economists, and the theory of intra-institutional economic development has become a popular view of development economics. [4](p.4 1) Second, the introduction of new institutional economics has brought new changes to development economics.
1, in methodology
First of all, the new institutional economics has a great influence on the traditional development economics in research methods. In the detailed investigation of Coase's paper, the founder of new institutional economics, it is found that "its research method has three outstanding characteristics: first, it only studies the real economic phenomenon, not only the specific cases that appear in reality, but also the assumptions of the model should conform to reality; Second, focus on case-based small sample research, pay attention to induction, but do not rule out deduction; The third is to start from the margin. " [5] North also stressed: "History is very important. ..... because the present and the future are linked with the past through the continuation of a society. The choice of today and tomorrow is determined by the past, and the past can only be understood as a process of institutional evolution. " [6](P.2) This has had a far-reaching impact on scholars who later used the new institutional analysis method to study development issues. Ostrom, Fini, Pickett and others' admiration for "using heuristic research" is in the same strain as Coase and North. They expect that "heuristic research will be used to explain the situation of choice-action and the inherent constraints and stimuli of these situations", while traditional economic development theory, especially neoclassicism theory, "is in danger of being over-generalized" ... This situation can be avoided to some extent by explaining in detail how heuristic research puts variables in a specific environment at the right time. On the basis of real case studies, institutional analysis allows us to "penetrate" social facts rather than explain development problems away from them. At the same time, a large number of cases have been accumulated through "cross-cultural heuristic research", and "the level of understanding of the inherent action tendency of different societies and civilizations should be generated". [2] (page 35 1-353)
In fact, the differences in development performance of different countries cannot be effectively explained by formal institutional arrangements, and informal institutional arrangements will have a greater impact on development performance in many cases. The adoption of the case study method of new institutional economics stems from its profound insight into the complexity and diversity of different air systems and the great heterogeneity and particularity of the initial conditions of economic development in developing countries. The constraints of neoclassicism are simply not enough to express this complexity. Under the assumption that preference is established, traditional development economics excludes institutional factors that have a far-reaching impact on economic development, such as culture and ideology. In this sense, the new institutional economics not only overcomes the oversimplification tendency of neoclassical economics, but also overcomes its historical nihilism that puts economic theory in abstract time and space.
Early development economists, such as Hirschman and Moore, also conducted case studies on some developing countries, but because they mainly grasped the relevant variables in general, they only gave a rough description and analysis at best. The new institutional economics advocates methodological individualism, and holds that "the analysis of social units must start with the status and actions of specific members", and "society", "people", "enterprise" or "political party" is no longer considered as a collective that acts like an individual. [7] (P.4) Scholars such as V Ostrom, D Fini, H Pichette also clearly pointed out that "when adopting this (heuristic research) method, we don't have to imagine that the world of human experience needs to be conceptualized as a country and society, a market and economic groups, or socialism and capitalism. On the contrary, we can imagine that the exchange relationship exists in all societies, the market can have different characteristics, and its role in the action situation faces both constraints and opportunities. The existence of constraints and opportunities depends on the elements of various structural environments. " [2]( p.35 1) Paying attention to individual behavior in a specific environment may establish a solid micro-foundation for the theory of new institutional economics and overcome the defects of weak micro-foundation construction of structuralism and excessive abstraction of neoclassicism.
Although the new institutional economics represented by Coase basically retains the "core" of neoclassical methods on the premise of introducing institutions as the analysis object, it has the same static and relatively static analysis characteristics as neoclassicism. The new school of economic history, represented by North and vogel, is more dynamic through the investigation of institutional changes and the history of economic development. It avoids the dilemma of neoclassical method to analyze the dynamic problems of development by static method.
2. On the decisive factors of development.
Anti-poverty begins with discussing the factors that restrict development. Therefore, finding the decisive factors of development has always been one of the core contents of development economics. According to Harold-Thomas model and Rostow's "take-off theory", development economists in 1950s-1960s believed that for developing countries, capital formation was the constraint and decisive factor of economic development, which formed the "Capitalism" which overemphasized the role and position of capital formation in economic development. According to this theory, the root of poverty in developing countries lies in the scarcity of capital. Knox's poverty vicious circle theory and Nelson's low-level equilibrium trap theory further demonstrate the vicious interaction between capital shortage and development stagnation.
However, Capitalism ignores the fact that while developing countries are short of capital, there is widespread inefficient allocation and waste of capital. As McKinnon pointed out, "In the so-called undercapitalized economy where some sectors are limited by supply bottlenecks, there are usually surplus and underutilized factories and equipment." The new institutional economics points out that "land, labor and capital can only play a role in the system." The system is crucial. [2]( p. 122) This fully shows that capital shortage is not the fundamental reason that hinders the development of developing countries, but the result of underdevelopment. What hinders development is the common institutional defects in developing countries. Rent-seeking is widespread in many backward countries, which not only makes the motivation of producers and operators to improve economic efficiency disappear, but also makes a lot of resources of the whole economy be spent on rent-seeking activities, increasing the transaction cost of economic activities through bribery and sectarian activities. These aspects have undoubtedly greatly weakened the internal strength of the national economy, and it is difficult to form much-needed investment for economic development or seriously distort the direction and structure of investment.
Neoclassicism, which started with a fierce attack on the dogma of state control, believes that there is a serious "government failure" in developing countries, and it is the trampling of "visible feet" on "invisible hands" that should be responsible for poor economic performance. As long as the government gives up excessive intervention in the economy and allows the economic system to "get the right price", the market mechanism will automatically realize the optimal allocation of resources, and the static optimization will eventually be transformed into efficient dynamic economic development. As the basis of new institutional economics, Coase theorem tells us that trading is the premise of the market. In the real world where transaction costs are positive, any meaningful market economy is impossible without an appropriate system. Olson also clearly pointed out that the most important thing in a prosperous market economy is those systems that can protect individual rights. Without these systems, no one will actively save and invest. In the book The Rise of the Western World, North pointed out that efficient organization is the key to economic growth; It is also the reason for the rise of the western world. Because institutions provide a framework for human interaction, they establish a relationship of cooperation and competition, which constitutes a society or an economic order.
3. On development policy.
Structuralism holds that there is structural rigidity and capital shortage in developing countries, which is to use the power of the state to distort the price of resources to accumulate capital and organize balanced or selective large-scale investment in various sectors of the national economy to get out of the poverty trap. Neo-classicism holds that as long as the government "liberalizes everything, privatizes everything, and then stays out of it", the economy can naturally develop. According to the new institutional economics, the most important policy to promote economic development is to establish an effective institutional system. Because (1) system increases the availability of resources and improves the transparency of information by determining clear rules, thus reducing the uncertainty and risk of economic activities and reducing transaction costs, thus promoting the better operation of the market; (2) By clearly defining property rights, the system makes the private rate of return close to the social rate of return, encourages the emergence of innovation and entrepreneurs, and provides sustained impetus for economic development; (3) By establishing the basic rules of social activities, the system expands the choice opportunities of human beings in the fields of economy, politics, law and culture, thus further enriching the connotation of development.
The emergence of a specific system depends on its demand and supply. D. Fini believes that "the demand for institutional changes basically stems from the understanding that since the existing arrangements can not obtain potential benefits, actors realize that by changing the existing arrangements, they can obtain potential benefits that cannot be obtained under the original system." And "the supply of institutional change depends on the ability and willingness of the new arrangement provided by the political order." [2]( p 138) Vernon Ratan further clarified the interactive relationship between economic growth and institutional change: on the one hand, economic growth generates potential growth profits, which is the demand of institutional change; On the other hand, economic growth also promotes the knowledge progress of social science and organizational behavior, which constitutes the supply side of institutional change. The combination of these two aspects leads to induced institutional changes. It can be seen that the Latan-style institutional change is completely a market behavior. In view of the public goods characteristics of the system, Lin Yifu believes that if induced institutional changes are the only source of new institutional arrangements, then the supply of institutional arrangements in a society will be less than the social optimal. Therefore, it is necessary for the government to carry out mandatory institutional changes. However, public choice theory and "North Paradox" show us that on the one hand, the government may stimulate economic growth by arranging an incentive system, but on the other hand, due to the preference of rulers, ideological rigidity, bureaucracy and other factors, the government may maintain inefficient institutional arrangements. In view of this, the new institutional economics believes that the establishment and improvement of the system is more important than anything else in promoting development. The emergence of efficient institutional arrangements depends on the interaction between the government and society, especially the strict restrictions on the government, that is, the establishment of a restricted government. In this sense, the new institutional economics has broken the illusion of structuralism "government omnipotence" and neoclassicism "market omnipotence", and provided a more realistic perspective for the policy research and orientation of development economics.
In a word, the new institutional economics has absorbed many positive factors of structuralism and neoclassicism, both in methodology and in the content covered by the theory itself, and has carried out enlightening integration within its own framework, and deepened on this basis, fully embodying the development trend of micro-positivism and internal school integration of development economics. In this sense, the new institutional analysis method plays an increasingly important role in the theory of economic development, which may be the real road to the revival of development economics. Third, the challenges and future trends of institutional analysis methods in development economics.
In less than twenty years, new institutional economics has had a great influence on development economics. While making the scholars who study the theory of economic development sit up and take notice, because it is still in the growth stage, there are also many shortcomings. Undeniably, institution is a wide-ranging, extremely rich and complex category, and its analysis has already surpassed the traditional research field of mainstream economics. Accordingly, the literature on the combination of institutional economics and development economics is still complicated and messy. Not only the core concepts such as system and transaction cost are not defined uniformly, but also there is a lack of recognized strict logic system and insufficient modeling. At present, logical positivism is still an indispensable mainstream method to test economic theory. The poor measurability of its main concepts and the difficulty in obtaining data have also seriously hindered the more accurate and in-depth study of the relationship between institutions and economic development and its quantitative application in the field of policy research. For development economics, the integration of institutional economics needs a lot of work, such as concept sorting, framework construction, modeling and so on.
At the same time, in a strict sense, what attacks neoclassicism is institutionalism with "no system" analysis, and its own internalization of the system is also incomplete. For example, when analyzing the choice of contractual arrangements by making full use of transaction costs, Zhang Wuchang took the level of law enforcement of the legislature for granted; Ostrom and others also analyze the constitutional system of developing countries as exogenous variables. Moreover, the market itself is a system. However, the new institutional economics did not explain why the market came into being theoretically. Coase only studied the origin of enterprises under the condition of market existence; Williamson also takes the hypothesis of "market existence" as the initial condition of his analysis. From 1980s to 1990s, a large number of developing countries urgently needed a market cultivation theory from planning to market. Faced with this situation, institutional analysis has not provided a satisfactory answer so far. For the above problems, the emerging classical economics represented by Yang Xiaokai has made some exploratory contributions.
As Ostrom admits, another major challenge is "how to understand the nature and establishment of human social order". Because "it requires scholars and related professionals to choose institutional arrangements that enable them to explore others in different human societies. In order to solve this problem, we often fall into improper cultural ethnocentrism ... Compared with people living in underdeveloped societies, people living in developed societies often show a strong sense of superiority, if not arrogance ... "[2] (pp. 334-335) is very obvious in the masterpiece Reflection on Institutional Analysis and Development, which is a good combination of new institutional economics and development economics. V Ostrom and others also think more or less that only under the western-style political system and market system can the economy develop continuously. For the combination of institutional economics and development economics in the future, it will be far away if we can't really start from the reality of developing countries and investigate the requirements and influences of economic and non-economic factors on institutional arrangements in these countries.
The new institutionalism analysis method, which emerged in 1980s, has a great and far-reaching impact on development economics. As Arrow said, the "new institutional economics movement" is mainly not limited to giving answers to traditional questions of economics. On the contrary, he also answered a new question, that is, why the economic system appeared in this way rather than that way; Its combination with economic history brings a sharper analysis of "primitive economy" than traditional theory. North also said: "Our serious study of this system is only the beginning. The prospect of this research is bright. We may never have a clear answer to all these questions, but we can do better. " [3] (page 362) References:
[1] Huang Shaoan. Introduction to property rights economics [M]. Jinan: Shandong People's Publishing House, 1995.
[2] V Ostrom, D Fini, H Picht. Thoughts on system analysis and development [M]. Beijing: Commercial Press, 1992.
[3] Tan Chongtai. The New Development of Development Economics [M]. Wuhan: Wuhan University Press, 1999.
[4] Chen Zongsheng. Development economics [M]. Shanghai: Fudan University Press, 2000.
[5] Zhou Yean. Reflections on the Research of New Institutional Economics in China [J]. Economic Research, 200 1(7).
North. Institution, institutional change and economic development [M]. Shanghai: Shanghai Sanlian Bookstore, 1994.
7 Eric G. Philubboton, Rudolf Richter. New institutional economics [M]. Shanghai: Shanghai University of Finance and Economics Press, 1998