The explanations derived from neo-classical theory are not satisfactory because, while the models may account for most of the differences in performance between economies on the basis of differential investment in education, savings rates, etc., they do not account for why economies would fail to undertake the appropriate activities if they had a high payoff.
Institutions determine the payoffs.
In the following pages, I sketch out a framework for analyzing institutions. This framework builds on the economic theory of choice subject to constraints. However it incorporates new assumptions about both the constraints that individuals face and the process by which they make choices within those constraints. Too many gaps still remain in our understanding of this new approach to call it a theory. Please take the time and register at our new service.