ECONOMIC INSTITUTIONS

Definition:
Economic institution deals with the production, distribution, exchange and
consumption of goods and services.
Structure of Economic Institution:

Characteristics of Economic Institution:

Economic system:
Every society has developed a system based on some ideology by which control
and use of capital goods and services are determined. Whether it is totally in the
hands of government or private individuals or in between the two extremes i.e.
government and individuals e.g. there are communistic, capitalistic, socialistic or
such other forms of economy. These forms of economy have actively involved the
people and compelled them to interact with each other.
Division of labour:
The main characteristics of economic institution are that of division of labour. This
is most important in the industrial economy where specialization and
interdependence are essential features. It has made the economic activities of
individuals most efficient and organized. The labour has been divided and the
roles have been allotted on the basis of status.
Production and distribution:
The economic institution provides formal and informal norms for production and
distribution of goods and services with their prices.
Economic organization:
There are different economic organizations in primitive, agrarian, and industrial
societies, which give different roles and statuses to the members of society.
Methods of production, exchange and distributions of economic goods and
motive of people engaged in such activities are according to the economic
organizations. For example: trusts, partnerships, and such other organizations are
gaining popularity now a day.
Development of technology:
Economic institution is quite ahead of other institutions in the use of technology.
It has increased the need of technology. Technology is being introduced with
greater speed in every field of economic activities all over the world. We are in a
position to say that economy invents technology and technology produces
economy.
Function of Economic Institution:
Economic institutions have provided two types o0f functions i.e.:
a) Manifest function
b) Latent function.
Manifest functions:
To control and regulate good and services:
It is the most important function to control to control and regulates capital goods
and services in a community or a society. Such a control and regulation is simple
in folk societies while quite complicated in industrial societies.
Necessities and luxuries:
It provides necessities and luxuries to the individuals on a set pattern. It satisfies
basic needs of the individuals and more than the basic needs i.e. luxuries and
comforts.
Division of labour:
The division of labour has given different roles to different individuals on the basis
of their statuses.
Latent functions:
Distribution of power:
There is distribution of power and authority among various classes which is
applicable both in industrial and agricultural societies. There is discrimination
among belonging to various classes during distribution of power and authority.
Stratification:
The distribution of power and authority affects individuals in a different way.
There are landlords, industrialists, and employers while others are tenants,
labourers and employees. The latter are not definitely equal to the former in their
social status.
Determining socio-economic status:
The level of achievement of economic goods and services by an individual and
also the possession of amenities and luxuries in a given society at given time let
the economist to determine ones socio-economic status.
Inheritance of property:
The economic institution is responsible also for the distribution of property and
determines inheritance. Economic institution gives the right of ownership and use
of property to the individuals in society.
Political hold:
Higher economic status is closely related with greater political hold. The nations
which enjoy higher and sound economic position in the world dominate the
political life.