Page 87 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.72, # 2, 2015, pp. 87- 97

THE RISE OF NEW INSTITUTIONAL ECONOMICS AND
ASSESSMENT ITS CONTRIBUTIONS TO THE POST WASHINGTON
CONSENSUS

Bahruz Natig Babayev
MSc, Azerbaijan State University of Economics
Email: [email protected] Tel: (055) 950 82 39
Abstract
The main objective of this article is to describe the rise of New Institutional
Economics (NIE) and assess its contributions to the Post Washington Consensus
(PWC). This paper argues that the rise of the NIE has provided theoretical ideas for
the PWC, but it is still debatable how the contributions of the NIE are effective to
tackle development challenges. However, these contributions can still be considered
important in the development thinking and their accurate application and
implementation in various traditional societies can have long term development
impact.

Key words: Post Washington Consensus, New Institutional Economics, institutions,
World Bank, International Monetary Fund, Consensus.

JEL classification: B52, 017

The rise of the New Institutional Economics (NIE) has founded a new
theoretical school of economic thinking which supported most policy prescriptions
within the Post Washington Consensus (PWC). The theoretical thinking of the neo-
classical economics was about a minimum role of state in economic and social
development, and policy prescriptions of this paradigm for the developing countries
were listed in the so-called Washington Consensus (Ahrens, 1999: 18). However,
the economic programs executed under the Washington Consensus did not result in
positive changes in economic performance of most developing countries (Fine,
2006: 7). Since development challenges have remained unsolved in the developing
world after the execution of programs on economic liberalization based on neo-
classical economic thought, the role of state and institutions in economic
performance are promoted extensively within the PWC to improve economic
conditions of the developing countries. A new group of ideas contributed with the
rise of the NIE were proposed on development under the PWC.

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