European Integration Studies, Miskolc, Volume 4. Number 1. (200 ! pp. "# $.

THE NEW INSTITUTIONAL APPROACH

RITA TRK Institute of Economic Theories, University of Miskolc 3515 Miskolc-E yetemv!ros, "un #ry drtorokrita@freemail.hu
$iel% of rese#rch& ne' institution#lism Abstract: (ith res)ect to the Euro)e#n Union the %etermin#tion of the role of the collective institutin#l system seems to *e )#rticul#rly essenti#l+ ,ince # si nific#nt )ercent# e of the #c-uis commun#ut#ire must com)ulsorily *e c#rrie% out, or h#s hi h-)riority over the le isl#tion of the in%ivi%u#l countries, the collective co%ific#tion #n% #ssertion of l#' #lso seem to un%er)in the convincement of the institution#lists s#yin th#t the institutions of the union h#ve # si nific#nt effect on the economic, soci#l #n% other )rocesses of the mem*er st#tes+ The )ur)ose of the )#)er is to )rovi%e #n overvie' on the #))ro#ch of the economics, on the *#sis of forei n s)eci#list liter#ture, surveys #n% #rticles+ .n the *#sis of soci#l #n#lysis levels %efine% *y .liver E+ (illi#mson I system#ti/e #n% #ttem)t to %emonstr#te ho' %ee)ly the re)resent#tives of the tren% %e#le% soci#l #n#lysis #n% 'h#t the m#in fiel%s of their #n#lyses 'ere+

Introduction
At the time 'hen the )olitic#l economy '#s re)l#ce% *y the neo-cl#ssic#l economy, the su*0ect of e1#min#tion in economics '#s #lso re-structure%+ The #n#lysis of the societ#l ch#n es '#s t#ken over *y other soci#l sciences first of #ll *y sociolo y+ "o'ever, the *oun%#ries of this sh#re of 'ork #))e#rin to *e firm 'ere *rou ht into -uestion *y economics #ttem)tin to #n#lyse the soci#l ch#n es economic#lly+ Economists cre#te% # conce)tion#l tool*#r, 'ith the hel) of 'hich they #ttem)te% to %erive the economic institutes2 effect u)on the #ctivity of the )#rtici)#nts of the economy from the economic form#tion of the costs #n% e#rnin s+ An%, if the effect of the %ifferent soci#l institutions u)on the in%ivi%u#l economic %ecisions *ecomes e1#min#*le *y the usu#l me#ns of the economic #n#lysis, the institutions 'ill *e im)ort#nt for the economy #s 'ell 34e%eon 15567+ The 8e' Institution#l Economics 38IE7 c#n *e %erive% from the e1cellent revie'ers of the convention#l i%e#s, 'hich *elieve% th#t the institutions #re im)ort#nt from the )oint of vie' of the #n#lysis or r#ther they #re suit#*le for *ein #n#ly/e%+ Its re)resent#tives '#nte% to inter)ret the ori in #n% the ch#n e of the institutions on economic *#sis& the ch#n e of the ol% institutions #n% the ener#tion of the ne' ones is to # si nific#nt e1tent *rou ht #*out *y the economic m#rket forces 3M!ty!s 15557+ They stu%y the inter#ction of the in%ivi%u#l %ecisions #n% the institution#l ch#n es 'ithin # theoretic#l fr#me'ork, 'hich st#tes -uestions referrin to the m#cro society on the roun% of the micro theory+ .ut of its re)resent#tives firstly I 'oul% like to mention 9 8o*el l#ure#te schol#rs& Kenneth Arro', $rie%rich "#yek, 4unn#r Myr%#l, "er*ert ,imon, Ron#l% :o#se ;s <ou l#ss 8orth+ =#th-*re#kers 'ere the schol#rly #ctivities of Alfre% :h#n%ler on the fiel% of *usiness history, #n% the rese#rches in the structur#l theory c#rrie% out m#inly in :#rne ie, 'here Rich#r% :yert #n% >#mes M#rch c#n *e em)h#si/e% in #%%ition to ,imon+ >ohn R+ :ommons #n% Armen Alchi#n #lso #ssiste% the stu%y of the institution#l economy *y )rovi%in im)ort#nt thou hts+ $rom the si%e of the l#' co it#tive theoretici#ns c#n #lso *e foun% es)eci#lly in connection 'ith the l#' of contr#ct, for e1#m)le K#rl ?le'ellyn, ,te'#rt M#c#ul#y, Ion $uller #n% I#n M#cneil+ The 4erm#n "istoric#l ,chool #lso %e#lt 'ith i%e#s rel#te% to this 3$uru*otn #n% Richter 15517 +

%&e ne' institutional approac&

1. Four l ! ls o" social anal#sis

The ne' institution#l economy @ em)h#si/es (illi#mson Aunifies the #s)ect of the 0uris)ru%ence, the economics #n% the structur#l theoryB+ (illi#mson m#kes %istinction *et'een four levels of soci#l #n#lysis&

?evel 1

E%b dd dn ss 3reli ion, conventions, tr#%itions, ethics, norms, etc+7 Institutional n!iron% nt $orm#l l#'s of #me 3constitution, 0u%ici#ry, %e)#rtment7

?evel C

,
?evel 3 Control& %ana' % nt :ontr#ct, h#rmoni/#tion of m#n# ement structres 'ith tr#ns#ctions Resource #lloc#tion #n% em)loyment 3)rice #n% -u#ntity7 $i ure 1+ ?evels of soci#l #n#lysis
The continuous #rro's connectin # hi her level 'ith # lo'er one in%ic#te th#t the hi her level sets limits to the level %irectly *elo' it+ The %#she% #rro's )ointin *#ck'#r%s connectin the lo'er levels 'ith the hi her ones re)resent the fee%*#ck, the res)onse+ In the )ro ress of time the system *ecomes more #n% more com)le1+ The 8IE m#inly %e#ls 'ith levels C #n% 3+

?evel F

$. First l ! l: %b dd dn ss
The hi hest level is the level of soci#l em*e%%e%ness, soci#l in r#ine%ness+ There #re the norms, conventions, ethics, tr#%itions #n% reli ion+ The institutions on this level ch#n e very slo'ly, hun%re%s or thous#n%s of ye#rs #re nee%e% for the ch#n e+ This level is *ein #n#ly/e% *y sever#l histori#ns %e#lin 'ith economics #n% *y other schol#rs %e#lin 'ith society 3Ro*ert ?eon#r%i, R#ff#ell# 8#netti, ,#muel "untin ton, Dictor 8ee7, #n% the liter#ture #*out the culture 3=#ul <im# io7 #lso %e#ls 'ith it to # l#r e e1tent+ The )ro*lems rel#te% to this #re tre#te% *y 8eil ,melser #n% Rich!r% ,'e%*er in the intro%uction of their *ook 'ith the title E"#n%*ook of Economic ,ociolo y2, in 'hich they st#te th#t Ethe conce)t of em*e%%e%ness still nee%s # lot of theoretic#l s)ecific#tion+2 ,ever#l contem)l#tives think th#t if 'e coul% et #c-u#inte% 'ith the mech#nisms, *y 'hich these inform#l institutions forme% #n% c#n survive, #n% 'e #lso coul% un%erst#n%

%&e ne' institutional approac&

them, it 'oul% #ssist the un%erst#n%in of the slo' ch#n e of the institutions #t level 1 to # l#r e e1tent+ .liver (illi#mson thinks th#t more out of the inform#l institutions mentione% form s)ont#neously @ i+e+ %eli*er#te )l#nnin is only ch#r#cteristic to them in # minim#l me#sure+ If these evolution#l ori ins #re #lre#%y iven, then they 'ill *e E#%o)te%2, therefore they #re ch#r#cterise% *y # hi h me#sure of Est# n#ncy2 @ some of them *ec#use they #re function#l 3for e1#m)le the conventions7G #n% others *ec#use of the f#ct th#t they re)resent # sym*olic v#lue *ec#use of #therin s of follo'ers of the true f#ith 3$uru*otn #n% Richter 15517+ "o'ever, the m#0ority of the institution#l economists #cce)t this level #s it is, #n% #ckno'le% e th#t the institutions forme% this '#y h#ve # lon term influence thereu)on, ho' # society controls itself+

(. S cond l ! l: institutional n!iron% nt

The secon% level is the institution#l environment . The structures here #re )#rtly results of evolution#l )rocesses, *ut here #lre#%y #))e#rs the )ossi*ility of sense of )ur)ose+ If 'e overste) the level 1 ty)e Einform#l limits 3s#nctions, t#*oos, conventions, tr#%itions, etc+72, 'e et to the Eform#l rules 3constitutions, #cts, )ro)riet#ry ri hts72 38orth7 3Erik $uru*otn #n% Ru%olf Richter, 15517+ This ives '#y to the first-r#nk economy, the o#l of 'hich is to %efine #n% s)ecify the form#l l#'s of #me+ The e1ecutive-, le isl#tive-, 0u%ici#l-, #n% offici#l functions of the overnment *elon to the )ur)osive instruments on the secon% level, #s 'ell #s the #ssi n#tion of the )o'er *et'een the %ifferent levels of overnin 3fe%er#lism7+ Its further im)ort#nt ch#r#cter is the %etermin#tion #n% v#li%#tion of the )ro)riet#ry ri hts #n% the #cts of the contr#ctu#l l#'s+ Althou h these #re un-uestion#*ly im)ort#nt 'ith res)ect to the )ro%uctiveness of #n efficient economy 38#th#n Rosen*er , ?+ E+ Hir%/ell, Ron#l% :o#se, 8orth, =#ul ,)iller7, # )ro ressive ty)e, #l'#ys #ccumul#tive ch#n e is h#r% to kee) in check+ M#ss%iss#tisf#ction, civil '#r, 3The lorious revolution @8orth #n% H#rry (ein #st7, or the occu)#tions #fter the secon% 'orl% '#r, suffere% thre#ts 3mei0i revolution7, coll#)ses 3E#stern-Euro)e #n% the former ,oviet Union7, milit#ry )utsch 3:hile7, or # fin#nci#l crisis 38e'-Ieel#n%7 @ c#use on occ#sions very si nific#nt *re#k# e in the #cclim#ti/e% forms+ In such # c#se the r#re o))ortunity for intro%ucin reform#tions o)ens+ ,uch E%ecisive moments2 count r#ther #s e1ce)tion, th#n re ul#r+ .ur re#ction to such o))ortunities often f#ils+ An% 'ithout such o))ortunities the l#r er mo%ific#tions of the l#'s of #me h#))en only once # %ec#%e or once # century+ The Euro)e#n Union for e1#m)le h#s #lre#%y *een E%evelo)e%2 for fifty ye#rs, #n% is still in the e#rly st# es of its %evelo)ment 3$uru*otn #n% Richter 15517+ As I h#ve mentione%, the )ro)riet#ry ri hts c#n *e )ut onto this level, #n% the rese#rches rel#te% to its fin#nci#l )#rt 'ere ch#r#cteristic to the 159J2s+ .ne of the centr#l to)ic of the institution#l economics is the )ro)erty structure+ A com)etitive m#rket ensures the free%om of the )riv#te )ro)erty #n% the contr#ct+ Un%er )ro)erties 'e un%erst#n% everythin , 'hich *rin s )rofit, or c#uses s#tisf#ction in the 'i%est sense+ "o'ever, in or%er to re#li/e this s#tisf#ction, the in%ivi%u#l must )ossess the )ro)erty+ The v#lue of the )ro)erties to *e e1ch#n e% is %etermine% *y the me#sure of the f#culties rel#te% to the )ro)erties, 'hich 'ill *e effectively #ssi ne%+ Accor%in ly, the e1)l#n#tion of the f#ct th#t the m#rket#*le

%&e ne' institutional approac&

v#lue of t'o )hysic#lly i%entic#l )ro)erties %iffers from e#ch other lies in the f#ct th#t the ri hts for #ssets rel#te% to them #re #lso %ifferent+ There #re sever#l c#te ories of the ri hts for #ssets, out of 'hich the )ro)riet#ry ri ht is the most f#mous one+(e m#ke %istinction *et'een three m#in elements of the )ro)riet#ry ri ht& 1+ the ri ht to use the thin 3usus7 C+ ri ht to collect the )rofits 3usus fructus7 3+ the ri ht of %is)os#l 'ith the thin 3#*usus7 The l#st element is the most im)ort#nt com)onent of the )ro)riet#ry ri ht, inclu%in the )ro)rietor2s ri ht to #ssi n to others #ll of his or her )ro)erty 3for e1#m)le *y sellin it7 or # )#rt of th#t 3for e1#m)le *y lettin it7, #t # mutu#lly #%v#nt# eous )rice+ ,ince #ccor%in to the )rinci)le Anemo )lus iurisB no one is entitle% to #ssi n more ri hts th#n himself or herself is in )ossession of, the me#n of e1ercisin #n influence on the e1istin )ro)riet#ry structure is to control the me#sure of the *#rter #n% the con%itions of the tr#ns#ction+ The )ro)riet#ry ri ht is e1clusive to the effect th#t it c#n only *e restricte% *y )ersons *ein entitle% *y the rule of l#' 3or the )ro)rietor him-Kherself7+ If )riv#te- or )u*lic )ro)riet#ry ri hts #re %e*ilit#te% *y restrictions, the e1)ect#tions of the )ro)rietor of the instrument concernin the use of the instrument 'ill #lso ch#n e, therefore the v#lue of the instrument *uil%in the roun% of the )ro)riet#ry ri ht 'ill ch#n e for the )ro)rietor #n% for other )eo)le #s 'ell, #n% in conse-uence of #ll of this the terms of tr#%e of the )ro)riet#ry ri hts 'ill #lso ch#n e+ The restriction of the ri hts of the )ro)rietor c#n *e concerne% 'ith the mo%ific#tion of the form, content #n% )l#ce of the instrument, or 'ith the tr#nsfer of the ri hts rel#te% to the instrument+ In his *ook EThe $e%er#l :ommunic#tions2 :o#se #r ues out th#t E# system of )riv#te contr#ctors c#n not function )ro)erly, unless the )ro)riet#ry ri hts #re r#ise% from fin#nci#l resources+ If so, then the )erson, 'ho '#nts to em)loy # fin#nci#l instrument, h#s to )#y to the )ro)rietor in or%er to et th#t+ Hoth the ch#os #n% the overnment ce#se, e1ce)t for the le #l system, 'hich is nee%e% to %etermine the ri hts #n% to t#ke %ecisions in moot c#ses2 3:o#se7 3$uru*otn #n% Richter 15517+ As soon #s the ri hts #re %etermine% #n% their #ssertion is #lso ensure% the overnment st#n%s #si%e+ The m#rket o)er#tes 'on%erfully+ (illi#mson me#ns th#t this com)#ct #ffirm#tion illustr#tes *oth the fortes #n% the 'e#kness of the liter#ture h#n%lin 'ith the ri hts+ The forte of this theory is th#t it l#ys em)h#sis on the ri hts, 'hich shoul% *e the norm#l c#se 3Armen Alchi#n, :o#se, "#rol% <emset/7+ Its 'e#kness is the unre#son#*le use of shifts+ $or e1#m)le the #ffirm#tion s#yin th#t the le #l system 'ill elimin#te the ch#os *y %eterminin #n% #ssertin the ri hts #ssumes th#t the %etermin#tion #n% #ssertion of such ri hts is e#sy 3costfree7+ It c#n not *e st#te% concernin # lot of tr#ns#ctions+ Heyon% the l#'s of #me 3)ro)erty7 the course of the #me 3contr#ct7 #lso nee%s to *e t#ken into consi%er#tion+ "ere 'e et to the control of the contr#ctu#l rel#tions in the

%&e ne' institutional approac&

156J2s 3$uru*otn #n% Richter 15517+ An% this le#%s us to l ! l (, 'here the institutions of control #n% le#% #re to *e foun%+

). T*ird l ! l: control& %ana' % nt

Althou h the )ro)erty rem#ins #n im)ort#nt f#ctor, the #ssertin le #l system %eterminin the #cts of the )erfectly 'orkin s#les contr#ct is not 'orke% out yet+ ,ince the cost-free 0uri%ic#l %ecree is only # fiction, the #ff#irs of the contr#cts #n% the settlement of the %iscussions #re mostly m#n# e% *y the )#rties themselves @ on the '#y of )riv#te %ecrees+ The f#ct #lso emer e% th#t they r#ther conform to more #cts of contr#ct 3:ly%e ,ummers, I#n M#cneil7, th#n to one univers#l #ct+ .n this level the control of the contr#ctu#l rel#tions *ecomes the centre of the #n#lysis+ >ohn R+ :ommons h#% #lre#%y e#rlier im# ine% the o)er#tion of this *y st#tin the follo'in s& Ethe fin#l synthesis of the #ctivity h#s to cont#in in itself the three theories such #s conflict, mutu#lism #n% the %is)os#l+ An% this synthesis is nothin else *ut the tr#ns#ction+2 This not only results th#t the economy h#s to #cce)t the theory s#yin th#t the tr#ns#ction is the *#sic element of the #n#lysis, *ut #lso th#t the control is #n #ttem)t to et skille% in the %ecrees thus %#m)in the conflict #n% resultin # mutu#l )rofit for *oth of the )#rties+ In the st#n%#r% neocl#ssic#l theory n#mely the contr#cts 'ere re#li/e% *y the #uctioneer+ $#celess economic su*0ects met on the m#rket for # moment to e1ch#n e st#n%#r%i/e% '#res #t e-uili*rium )rice+ The tr#ns#ctions 'ere cost-free+ In c#se of the ne' institution#l school there #re no f#celess ch#r#cters, *ut the i%entity of the ch#r#cters is im)ort#nt, #n% em)h#sis 'ill *e l#i% on the stu%y of the contr#ct-rel#te% )rocesses, it focuses its #ttention on the #fter-)erio% of the contr#ct #s 'ell+ :osts 'ere iven to the tr#ns#ctions #s 'ell+ Accor%in to :o#se the cost of the tr#ns#ction is nothin else, *ut the Ecost of the use of the )rice mech#nism2, 'hile <emset/ %efine% it #s Ethe cost of the )ro)riet#ry title2+ E1)#n%in the #))ro#ches 'e c#n s#y th#t un%er tr#ns#ction#l costs 'e un%erst#n% the losses of resource, 'hich #rise *et'een in%ivi%u#ls %urin )re)#r#tion, re#li/#tion, #ccom)lishment, checkin #n% closin of tr#ns#ctions+ The %etermin#tion of its me#sure hits # #inst si nific#nt %ifficulties& (#llis #n% 8orth& '#nte% to enumer#te the tr#ns#ctions costs of the Americ#n economy on the *#sis of the n#tion#l invoices <emset/ m#%e #n #ttem)t #t the %irect me#sure 'ith the hel) of the costs of the fin#nci#l m#rket, on the *#sis of the %ifference of the )urch#se-, #n% the s#les interest r#te+ Althou h these #))ro#ches 'ere 'ithout results, they un#m*i uously #ckno'le% e% th#t the me#sure of the tr#ns#ctions costs is %etermine% *y the or #ni/#tion#l structure, #n% its sum is #l'#ys )ositive+ In #n economy in 'hich this sum *ecomes /ero, the r#ison %LMtre of institutions like money, or the common re ul#tion *ecomes -uerie%+ A )er)etu#l )ro*lem rel#te% to the -uestions mentione% #*ove is the vertic#l inte r#tion, 'hich )ro*lem '#s *rou ht u) *y :o#se in 1536 in his #rticle countin for cl#ssic 'ith the title EThe n#ture of the firm2+ .ut of this the f#ct turns out th#t #ny kin% of -uestion, 'hich

%&e ne' institutional approac&

#rise in rel#tion to contr#cts or c#n *e re'or%e% c#n #lso *e e1#mine% in # '#y, 'hich is useful #lso from the )oint of vie' of the com)#ny2s con%itions economi/in on the tr#ns#ctions costs+ The )ossi*le reor #ni/#tion of the tr#ns#ctions #mon the control structures is occ#sion#lly reconsi%ere%G it mi ht h#))en either #nnu#lly or #lso once # %ec#%e, often #t the time of nov#tion of the contr#ct or rene'#l of the instruments+
+. Fourt* l ! l: R sourc allocation& and %,lo#% nt ,uch %ifferent structur#l #n#lysis of the control must *e se)#r#te% from the le(el 4, on 'hich level the neo) classicist anal*sis o)er#tes 3Erik $uru*otn #n% Ru%olf Richter, 15517+ There #re o)tim#li/in instruments, often *or%er #n#lysis c#rrie% out, #n% the com)#ny ch#r#cteristic#lly m#n# es )ro%uctive t#sks 'ith this o*0ect+ The )rices #n% the )ro%uction #re more or less continuously #%0uste%+ The follo'in s #re 'ritten in notes of former #n#lyses& #n evolution#l level, #t 'hich the mech#nisms of the *r#in sh#)e 3,teven =iner7+ The #))lic#tion of these i%e#s in the economics is 0ust st#rtin to resh#)e our conce)tions #*out the hum#n f#ctor+

$in#lly *esi%es %eterminin the soci#l levels, (illi#mson focuses the #ttention on the -uestion of inno(ation #s 'ell+ In his o)inion the ess#ys on the structur#l innov#tions @ com)#re% to the technolo ic#l innov#tions @ 'ere set #si%e to # l#r e e1tent+ The 8IE #ttem)ts to com)ens#te this f#ct+ E.ut of the innov#tions of the m#nkin% the utili/#tion of the or #ni/#tion in or%er to re#li/e the o*0ectives of the hum#n *elon s to the e#rliest #n% the re#test ones2 3Arro'7+ (e must h#ve res)ect for the )enetr#tive im)ort#nce of the technolo ic#l innov#tion 3Ro*ert $o el7+ An% %ue to the f#ct th#t these t'o o)er#te to ether, # '#y must *e foun% for the common h#n%lin of the structur#l innov#tions 3$uru*otn #n% Richter 15517+ Althou h the mo%ern institution#lism h#s )lenty of )roce%ures, the #n#lyses h#ve not resulte% com)lete theory yet+ <es)ite this the theory is suit#*le to solve # num*er of )r#ctic#l )ro*lems, since it '#nts to solve the )ro*lems of the economic f#ctors in the '#y of contr#cts conclu%e% 'ithin em#nci)#te% rel#tions+ This '#y the unre#sone% overnment#l intervention c#n *e #voi%e%, #n% #t the s#me time the m#rket lo ic succee%s+ R " r nc s
$URUH.T8, E+ 4+ RI:"TER, R+ 315517, The 8e' Institution#l Economics& A collection of #rticles from the >ourn#l of Institution#l #n% Theoretic#l Economics, Te1#s A+ #n% M+ Univ+ =ress, 4E<E.8, =+ 315567, +, -talakul-s ga,das-gtana .s a ga,das-gtan -talakul-sa, KN/ #/%#s! i ,/emle 3O?ID+ Pvf+7 1+ s/!m, ".<4,.8, 4+ M+ 315557 Evolution #n% Institutions, :heltenh#mG 8orth#m)ton& EE+ MQTRQ,, A+ 315557 A mo%ern kN/ #/%#s! t#n tNrt;nete, Hu%#)est, Aul# Ki#%S

%&e ne' institutional approac&