Institutions, Efficiency, and the Theory of Economic Policy
Author(s)
Eatwell, John
Abstract
Contemporary economics has failed to achieve its only goal, creating theoretical approaches that serve as the basis for successful economic policy, because it has ignored the institutions through which economics operates in the real world. Neoclassical economics was built upon the assumption that markets are inherently efficient. Unless a market can be proven to be inefficient, it is considered efficient. The limits of the neoclassical school have been made apparent, but many of their faulty assumptions still constitute the basis of policy decisions. If institutions were seen as parts of the market, rather than inefficient exceptions to the rule, a more sound policy could be developed.
