Tuesday, April 20, 2010

Institutions and Choice

Regular readers of this blog know that I believe institutions play an important role in any economic system. The rules that exist (whether formal or informal) do a great deal to shape our decisions and create all kinds of incentives (economic, political, social and emotional) that play a role in how we make decisions.

To that end, I want to draw your attention to this book review from Sunday's edition of The New York Times (HT to A&L Daily). It offers some intriguing insights. And I think it can help us teach about institutions in the economics classroom.

For example, understanding cultural differences can offer insights into choices we make, or even choosing not to decide. How many things do you (or your students) do that are habits or traditions? Is there a law that says certain things must be done certain ways? But we do so because we perceive an incentive to do them a certain way.

Read the review, think about it, and please share your thoughts.

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