Institutions are rules and norms created by individuals that shape interactions in politics, the economy, and society. These include informal rules, like traditions, as well as formal rules, like laws and property rights. Institutions reduce uncertainty by providing a stable, though not always efficient, framework for individual interactions. They influence economic behavior and shape incentives.

This course explores the role of institutions in economic decision-making and market dynamics. The first part of the course provides an overview of what institutions are, why different institutions exist, and how they impact the long-term distribution of resources.

Building on these insights, the second part of the course discusses in detail when market failures occur, i.e. situations where they do not allocate resources efficiently. It explores when and how governments and public policies, as institutions, can improve upon existing outcomes. Topics include universal healthcare, public education, sustainability, financial sector regulation, discrimination, and the limits of government intervention. These topics will be explored through applied examples and using the theoretical framework developed.

By the end of this course, students will:

·      Have a thorough understanding of why institutions exist, their role in shaping long-term economic behavior, and how and through which channels institutions (like the state and public policy) can influence resource allocations, both positively and negatively.

·      Be able to read and understand original literature and effectively apply key insights from this literature.

·      Gain a deeper understanding of current economic policy debates and acquire the knowledge needed to actively engage in and influence them.

Attendance is generally required. A maximum of 20% of classes can be missed, but confirmation (e.g., a doctor's note) is needed to justify absences.

The course combines lectures with interactive elements to support both theoretical understanding and practical application. Key concepts will be introduced through instructor-led sessions, while group discussions, case studies, and student presentations foster student-centered learning. Critical engagement with academic and policy literature is emphasized throughout. Students will apply theoretical frameworks to real-world examples and current policy debates, encouraging both independent thinking and collaborative learning. Active participation is essential and contributes to a dynamic learning environment.

·      Active participation: 10%

·      Case study and presentation: 45%

·      Final essay: 45%

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bernhard.schmidpeter@wu.ac.at

Relevant readings and materials will be provided throughout the course, typically during or after each lecture.