Boekpresentatie – The microeconomics of market failures and institutions

The Microeconomics of Market Failures and Institutions is a new textbook with a multidisciplinary approach. Our idea is that history is an important aid in explaining standard economic mechanisms. We start from the rise of a state monopoly of violence after the neolithic revolution and end with the rise of democracy in 20^th century. The core insight of the book is that all market failures are due to externalities/missing markets/transaction cost (these are three words for the same phenomenon). Institutions like the state monopoly of violence, the rule of law, limited liability firms, and social insurance are designed to curb these market failures. Human history is the erratic process of the improvement of these institutions. The rise of capitalism in Western Europe and Northern America with its dramatic increase in productivity growth was only possible due to this institutional progress.

The book provides an in-depth discussion of five forms of transaction cost: commitment in time, commitment to the community, pure coordination, incomplete information on the trading partner and asymmetric information on the traded good. In various configurations, these transaction costs cover all market failures and can therefore help explain the evolution of institutions.

We hope you can join us for this event to mark the book’s publication and learn more about its key insights and contributions to the study of economics.