In recent years scholars and policy makers alike have paid increasing attention to the complex relationship between social institutions and economic performance. There are various reasons why it is important to understand the role of institutions: economic stagnation in many developing countries; structural problems in the old industrial economies; and the collapse of the soviet economies of the former Soviet Union, Central Asia, and Eastern and Central Europe. Institutional analysis is of paramount importance for guiding the transition to markets in formerly centrally managed economies. Many scholars now recognize that mainstream economic analysis, neoclassical economics, is of little help in restructuring economies that lack secure markets; the same criticism holds for other disciplines in the social sciences.

An interdisciplinary research program that deals explicitly with the link between institutions, institutional change, and economic performance is now emerging. The new institutional analysis is a line of investigation that departs from but does not abandon neoclassical economics. Central to the research agenda is an emphasis on property rights, the transaction costs of measurement and enforcement, and incomplete information. The research program has been further enriched through cross-fertilization with law, political science, sociology, anthropology, and history.

Although both theoretical and empirical contributions to this field are accumulating at an increasing rate and two pioneers of the approach recently received the Nobel Prize in Economics (R. H. Coase in 1991; D. C. North in 1993), the impression persists that the field is long on theoretical analysis but short on empirical work.