Emergent Populism and the Scope of New Institutional Economics

Populism, in both its positive and negative forms, can affect the economy and the material dimension of human life and existence. The primary focus of Institutional Economics, be it Old Institutional Economics or New Institutional Economics, is to analyze and engage with how humans interact. An improvement of institutional economics over traditional economics is the inclusion of the role of institutions in the choice vector and environment of the human choice-making process. In this entry, we attempt to connect this branch of economics, more specifically the New Institutional Economics framework, to populism both as an institution and as an anti-establishment phenomenon. We explore this interaction under two broad heads, namely populism as a solution to market failure and populism as a source of market failure. Our main argument is that institutions are endogenous elements in the market, especially the political market. The coverage of New Institutional Economics in populism constitutes the study of transaction costs and institutions in the political market.