Institutional economics in the context of "Wisconsin school"

In economics, a transaction cost is a cost incurred when making an economic trade when participating in a market.

The idea that transactions form the basis of economic thinking was introduced by the institutional economist John R. Commons in 1931. Oliver E. Williamson's Transaction Cost Economics article, published in 2008, popularized the concept of transaction costs. Douglass C. North argues that institutions, understood as the set of rules in a society, are key in the determination of transaction costs. In this sense, institutions that facilitate low transaction costs can boost economic growth.

Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit. Socialist systems that utilize markets for allocating capital goods and factors of production among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.

Socialist economics has been associated with different schools of economic thought. Marxian economics provided a foundation for socialism based on analysis of capitalism while neoclassical economics and evolutionary economics provided comprehensive models of socialism. During the 20th century, proposals and models for both socialist planned and market economies were based heavily on neoclassical economics or a synthesis of neoclassical economics with Marxian or institutional economics.

Philosophy and economics studies topics such as public economics, behavioural economics, rationality, justice, history of economic thought, rational choice, the appraisal of economic outcomes, institutions and processes, the status of highly idealized economic models, the ontology of economic phenomena and the possibilities of acquiring knowledge of them.

It is useful to divide philosophy of economics in this way into three subject matters which can be regarded respectively as branches of action theory, ethics (or normative social and political philosophy), and philosophy of science. Economic theories of rationality, welfare, and social choice defend substantive philosophical theses often informed by relevant philosophical literature and of evident interest to those interested in action theory, philosophical psychology, and social and political philosophy.

In sociology and in economics, the term conspicuous consumption describes and explains the consumer practice of buying and using goods of a higher quality, price, or in greater quantity than practical. In 1899, the sociologist Thorstein Veblen coined the term conspicuous consumption to explain the spending of money on and the acquiring of luxury commodities (goods and services) specifically as a public display of economic power—the income and the accumulated wealth—of the buyer. To the conspicuous consumer, the public display of discretionary income is an economic means of either attaining or maintaining a given social status.

The development of Veblen's sociology of conspicuous consumption also identified and described other economic behaviours such as invidious consumption, which is the ostentatious consumption of goods, an action meant to provoke the envy of other people; and conspicuous compassion, the ostentatious use of charity meant to enhance the reputation and social prestige of the donor; thus the socio-economic practices of consumerism derive from conspicuous consumption.

New Institutional Economics (NIE) is an economic perspective that attempts to extend economics by focusing on the institutions (that is to say the social and legal norms and rules) that underlie economic activity and with analysis beyond earlier institutional economics and neoclassical economics.

The NIE assume that individuals are rational and that they seek to maximize their preferences, but that they also have cognitive limitations, lack complete information and have difficulties monitoring and enforcing agreements. As a result, institutions form in large part as an effective way to deal with transaction costs.

Thorstein Bunde Veblen (/ˈθɔːrstaɪn ˈvɛblən/; July 30, 1857 – August 3, 1929) was an American economist and sociologist who, during his lifetime, emerged as a well-known critic of capitalism.

In his best-known book, The Theory of the Leisure Class (1899), Veblen coined the concepts of conspicuous consumption and conspicuous leisure. Veblen laid the foundation for the perspective of institutional economics. Contemporary economists still theorize Veblen's distinction between "institutions" and "technology", known as the Veblenian dichotomy.