PAM_2000_Spring_2009_Lecture_8

PAM_2000_Spring_2009_Lecture_8 - PAM 2000 Lecture 8 Agenda...

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    PAM 2000 Lecture 8 Agenda Role of Institutions in Markets: Property Rights and Contracting Deriving a demand curve Income and substitute effects of a price change Normal good Inferior good Giffen Good Changes in Income: Engel curves
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    Role of Institutions in Markets Market participants (suppliers and demanders) do not operate in a vacuum They operate within an institutional setting : A set of legal arrangements (property rights, contracting rights, tort law, criminal law, regulations such as antitrust) and social norms of behavior (i.e. “its bad to steal”) Institutions and market operation interact
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    Role of Institutions in Markets Some institutions are conducive to market operation (and thus economic growth): Well-defined and enforced property rights Enforcement of contracts Stable set of legal rules Social norms supporting property and contracts Not only facilitate markets, but also encourage investment (physical, human capital, etc.)
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    Role of Institutions in Markets  (con’t) New learning on economic development: Why are some countries poor while others are wealthy? Due to quality of legal system/rule of law Legal Origins debate: Consider common law versus civil law systems (M,B,N, Ch. 4) Common law: “judge made law” Civil law: Codified law; determined by legislature
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    Role of Institutions in Markets 
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PAM_2000_Spring_2009_Lecture_8 - PAM 2000 Lecture 8 Agenda...

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