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Allan Schmid's book provides a readable introduction to institutional economics for those who have had little experience with an area of thought that traces its roots back to Thorstein Veblen and John Commons.

Review of Conflict and Cooperation: Institutional and Behavioral Economics, by Schmid, A.

At the same time, his book provides a number of insights for those who would like to explore more deeply the behavior of economic activities that are not restricted by the usual neoclassical assumptions. Over the years, Professor Schmid has presented his situation-structure-performance SSP paradigm as an alternate way to look at economic action.

Behavioral Economics: Crash Course Economics #27

He now expands his argument to create a theory of economic behavior. He argues that each situation has to be viewed through the lens of the structure that is in place in order to be able to predict the performance.

Conflict and Cooperation P: Institutional and Behavioral Economics

Different structures will lead to different performances for similar situations. These structures are not natural; they are created by institutions.

In the broad definition of the term, institutions are human relationships. In the first part of the book, Schmid develops the key factors that make institutions so important. Unlike the static view of neoclassical economics where equilibrium is paramount, Schmid offers a view of a system in flux.


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The situation goes Sometimes, the incommensurability of distinct categories of benefits precludes the very possibility of compensation. Thus, policy options are virtually never Pareto comparable, because it is almost never the case that all agents even weakly prefer the same institution. Conflict is normal and, according to Schmid, its detail and dynamics must therefore occupy center stage in any social science aspiring to real-world relevancy. Suggested Citation: Suggested Citation.


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