R S Rao While retaining the axioms of self-interest in the neoclassical economic theory, the new institutional economics brings in the role of collective action and to that extent binds the individual to the institutional framework. By questioning the propositions of a much talked about perfect competition and by suggesting that institutions do matter, it presents a frame- work for a new theory on the functions of capital markets in the developed world. The tool-kit thus developed in the west to help understand that system better could be useful in analysing economic institutions in India.
