Institutions and the imperfect market

It seems that the discussion about deregulation is dominated by economists. As a result the overruling consideration is efficiency to the exclusion of other factors which also ought to be considered. Institutions (law, rules, norms and conventions) do not represent economic values alone. Moreover, the entire discussion is conducted in the shadow of a particular economic perception which underrates the significance of institutions. This deficiency may well be the result of the neo‐classical model’s underlying assumption of perfect markets that obscures the role of institutions or puts them in a negative light. Recent economic insights recognize “imperfect markets” and relate this to imperfect information. It takes account of transaction costs next to production costs. It acknowledges the role of institutions, and abandons the mistaken perception that markets are necessarily antithetical to institutions. This leads to the conclusion that the debate about deregulation must not be conducted in general terms of a contradiction between the state and the market, but in the light of the appreciation that markets are strongly dependent upon institutions. The crucial question is the influence of specific institutions in relation to the underlying social and economic processes – to the dimensions of time and place.