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New institutional economics (NIE) is the study of the institutions of social, political, and economic interactions. Because these interactions occur in uncertain environments and the choices of individuals can be unpredictable, institutions—the formal and informal rules established by society—are developed to provide structure to, and reduce the uncertainty of, human interaction. Formal institutions include laws and regulations, while informal institutions include norms of behavior, cultural customs, and codes of conduct. Regardless of the type of institution, to be credible, they must be associated with enforcement mechanisms and consequences if not followed. A common way of thinking about institutions is to consider them the rules of the game and individuals and organizations as the game’s players. Like any game, the creation and enforcement of rules shapes ...

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