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Stepping aside from physics with subatomic particles and the mysteries of the universe, the social sciences tries to find the path to live our lives in a better way. One of the oldest social sciences is economics, and as it has the closest relation to our topic, let's talk about it a bit. The father of economics, Adam Smith described political economy as "an inquiry into the nature and causes of the wealth of nations''. After that there were a lot of theories to understand "principles of economics". We want to talk about Institutional economics.


Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior. The basics are simple:

  1. institutions DO matter
  2. people do NOT always rational and sometimes act as opportunists
  3. the costs caused by interpersonal relations matter as well as production costs


Some books to delve into the world of institutional economics


"Thinking, fast and slow" by Nobel prize winner Daniel Kahneman

The aim of his book is to "improve the ability to identify and understand errors of judgment and choice, in others and eventually in ourselves, by providing a richer and more precise language to discuss them. In at least some cases, an accurate diagnosis may suggest an intervention to limit the damage that bad judgments and choices often cause".


"The Rise and Fall of Nations" by Ruchir Sharma

One of the goals of this book is to shift the conversation about the world economy from an uncertain future to a more practical framework of 5-10 years and focus on predicting future upturns, downturns, and possible political unrest. Predictions for the next 20 to 100 years cannot be justified in principle, since new economic competitors can appear in five years, as was the case with China in the early 1980s, Eastern Europe in the 1990s, and much of Africa in the 2000s.


"Freakonomics" by Steven Levitt & Stephen J. Dubner

The unofficial slogan of the book is "Morality reflects how you would like the world to work, while Economics demonstrates how it really works". The main goal of freakonomics is to open up several upper layers of modern life and study what is happening under them. The book raises a lot of questions and the answers to these questions may seem strange at times, but they are pretty obvious and can be easily found by looking at school test results, crime statistics in new York, financial records of drug dealers, etc.

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