Institutions reduce
the amount of certainty in decision making. It is because the decision can
be refer back to the historical data on how certain decision or policy effect
another. Institutions determined by the experienced
of the county.In other words, based on the past,”what happen to this, if we
took this action?”. For example, during the 1998 crisis ,Malaysia make the decision
not to seek help from IMF and strengthen domestic economy. During that time Malaysia forms three
agencies to cater the issue on Bank capital system and corporate. Malaysia made
it by imposing currency control, and save few gigantic companies that are too
big to fail. Some of the company is Malaysia Airlines System (MAS) and Light
Rail Transit (LRT). While at the same
time South Korea took the IMF helps advices and survive the economic crisis
too.Their economic performance now is much higher than Malaysia. What has been
experienced by Malaysia , effects on economic policy we made today.
Therefore,
we can see that , each country have different “Nature of Instituitions” that influence which step we can take. In simple
word, eating Nasi Lemak in Malaysia would be much different to compare having
it in the United States. Institutions are the one that defines limits and the
set of choice of Individual.
Institutions have two types of constraint which is formal
and informal. Formal constraint such as Federal Constitution or certain statue.
Informal constraint will be in the form of convention, or codes of behaviour.
This constraint is the one that prohibits or permit individual action. It is
the basis on how the interaction between human takes place. To make Its easy, think
of a football game. Some rules were written and others not.However if the player
makes something that is generally accepted as wrong, the player will be
punished. The Player must respect the
rules of game.
Malaysia policy will always respect “ the rule of game”
for example protecting the right of Malay and Bumiputera. If the government
doesnt not follow the rule,they also will be punished. Try to imagine, If The Malaysia
affirmative policy implemented in Thailand for example, the government will
also be punished.What fits in Malaysia does not fit to Thailand and same goes
to the other way around.
Before we moved further , we must know that institutions
are different with organizations. Organizations is for example political party
, Dewan Rakyat and NGOs. Some organization has economic nature such as trade
union, Majlis Tindakan Ekonomi Bumiputera
and other.They also also education body such as universities, school and
politechnic. Organizations are not institutions however what organizations do
will have an influence over institutions. How the organization will change will
also coexistance with instituional change.
For example Malasyia case, UMNO is a political party
in Malaysia but not the Government Institutions. However, whatever people in UMNO
decide, or other party debate in the Parliament, will effect on the change of
the Instituitions.This will make institution evolve over time. Organization is
mean to achive Instituion objective.
Humans are the centre of the Institutions. Some economic theory actually is a study on the
behaviour of human. It become a set of useful theory because its logical consistence,
testable within set of hipothesis This is the foundation of Microeconomy which
is the predict human choice or behaviour based on the construct and constant historical
data.
