Toward a genuine institutional economics

Abstract This essay was delivered upon the occasion of receiving the James M. Buchanan Distinguished Fellow Award from the Public Choice Society in March 2025. The essay discusses James M. Buchanan's call for a genuine institutional economics and focuses on the research over the past 25 years by my colleagues and myself at the Mercatus Center attempting to develop that research program by focusing on endogenous rule formation in various settings. This work not only explored the function and operation of alternative institutional arrangements but the emergence, evolution and maintenance of the institutional order. As Buchanan himself put it: “Appropriately thorough analysis should include an examination of the institutional structure itself in a predictive explanatory sense. The economist should not be content with postulating models and then working within such models. His task includes the derivation of the institutional order itself from the set of elementary behavioral hypotheses with which he commences. In this manner, genuine institutional economics becomes a significant and an important part of fundamental economic theory.”