INSTITUTIONAL ANALYSIS OF LAW AND ECONOMICS: THE CENTRAL ROLE OF PROPERTY RIGHTS AND TRANSACTION COSTS

In the last two decades, economics has undergone an empirical turn. Economic theory and mathematical models, which previously dominated in terms of publications and attention, were overtaken by analyzes focused on methods of causal inference based on the exploration of exogenous variation and randomization to establish causal relationships between variables. This shift co -evolved with the realization of the importance of institutions in economic analysis. New Institutional Economics, which had long emphasized the central importance of institutions, was incorporated into the economics mainstream, as the randomization required to establish causal relationships often depends on institutional details. However, despite the new attention on institutions, they are often treated in a superficial or simplified way. In this article I describe in greater detail two central concepts of New Institutional Economics; property rights and transaction costs. Together, these concepts form the basis of the Coase Theorem, which is the starting point of both New Institutional Economics and Transaction Costs Economics, as well as Law and Economics.