This is the Cato Daily Podcast for Monday, August 7th, 2017.

I'm Keelb Brown. Culture and institutions are critical to enhancing our

understanding of economic decisions, but they're hard to put into

economic models.

In their new book, Applied Mainline Economics, Peter Betkey and Matt Mitchell, provide a broad

overview of persistent problems in economics and some ideas for addressing them.

In your book you talk about how institutions and culture are very important variables for economics

but they're not very well understood and trying to build those things into

economic models has been sort of a big challenge for the last oh 50 years or so.

Yeah, so Matt and I in the book it's important to remember that we're both students of Jim Buchanan and Buchanan's main

approached economics suggests that economics should be about exchange and the institutions within which exchange takes place.

It's that institutional environment which determines the shape and path of which the pattern of economic relations takes place.

And Buchanan's sort of approach is one where you have the same players,

you vary the rules and you get different outcomes.

So what the variation is in the explanation comes from changing the rules or changing the

institutions and then that will give us different outcomes and so

that's why markets behave differently than the way politics behave even though the actors in

politics and the actors in the market are the same type of actor and the exchange and they're both

engage in exchange but the way they engage in exchange is going to be different

depending on the context and so in the book we try to you know explain the consequences of that the

and so in the book we try to you know explain the consequences of that for the way we think about

not only just economic life but also for public policy.

...