New Institutional Economics shifts attention from markets themselves to the rules that shape them. Contracts, property rights, enforcement mechanisms, and informal norms determine how efficiently resources are allocated. When institutions are weak or misaligned, even strong market fundamentals fail to produce growth.

The framework highlights that incentives matter as much as prices. Institutions reduce uncertainty, coordinate expectations, and create the conditions for investment and innovation. Growth becomes not just a function of capital and labor, but of the rules that govern how they interact.