> For the complete documentation index, see [llms.txt](https://laurence-wilse-samson.gitbook.io/textbooks/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://laurence-wilse-samson.gitbook.io/textbooks/institutional-microeconomics/institutional-microeconomics.md).

# Institutional Microeconomics

> **Revised full draft, last updated November 2026.** One of 22 textbooks freely readable online ([all books](https://lwilsesamson.com/textbooks/)), all written with AI assistance. Corrections are welcome at <laurence@lwilsesamson.com>.

*Laurence Wilse-Samson*

All rights reserved.

***

An intermediate-to-advanced microeconomics textbook that takes institutions seriously from the start. Economics as embedded in social processes — not abstract optimization that later acknowledges institutions.

## Audience

Advanced undergraduates and MA students (main text), with formal appendices and starred sections for PhD readers.

## Structure

Thirty-two chapters in nine parts, followed by thirty-one mathematical appendices — the three-part Game Theory Toolkit (Appendices 0A–0C, with a short index page) and twenty-eight chapter appendices numbered to match their chapters, from Appendix 3 to Appendix 31 (Chapters 1, 2, 6, and 32 have none) — and the back matter (appendix roadmap, glossary, consolidated bibliography, index).

| Part                                                | Chapters | Coverage                                                                                   |
| --------------------------------------------------- | -------- | ------------------------------------------------------------------------------------------ |
| **I — Scarcity, Property, and Exchange**            | 1–5      | Scarcity as social fact, choice, demand, exchange institutions, non-market allocation      |
| **II — Markets as Institutions**                    | 6–8      | The price mechanism and money, supply and demand, adjustment and disequilibrium            |
| **III — Production, Costs, and the Firm**           | 9–12     | Technology, costs and industry structure, firm boundaries, internal organization           |
| **IV — Factor Markets, Competition, and Platforms** | 13–16    | Labor and human capital, competition as process, market power, platform economics          |
| **V — Information Economics**                       | 17–20    | Uncertainty and risk, adverse selection, signaling and screening, moral hazard             |
| **VI — Capital, Trade, and Emergence**              | 21–23    | Intertemporal choice and capital, global interdependence, coordination and macro phenomena |
| **VII — Market Design and Welfare**                 | 24–26    | Mechanism and market design, welfare and destitution, health and insurance                 |
| **VIII — Public Economics and Governance**          | 27–31    | Externalities and public goods, the commons, the state, taxation, public choice            |
| **IX — Capstone**                                   | 32       | The full toolkit applied to climate, housing, and digital markets                          |

Each Part opens with a Core Concepts page (for example [Part I](/textbooks/institutional-microeconomics/part-i-scarcity-property-and-exchange/00_part1_summary.md)): a narrative overview, a table of the Part's chapters against the four Spine questions, and a synthesis figure.

The [preface](/textbooks/institutional-microeconomics/00_preface.md) is the start of the main text. [Notation and Symbols](/textbooks/institutional-microeconomics/00_notation.md) lists the book's symbols. The sidebar is the table of contents.

## Reading Routes

The book is too large for a single semester. The [preface](/textbooks/institutional-microeconomics/00_preface.md) sets out four one-semester tracks with lecture counts and appendix pairings, plus a 28-lecture sequence covering 22 of the 32 chapters.

| Track | Course                                                                         | Chapters                |
| ----- | ------------------------------------------------------------------------------ | ----------------------- |
| **A** | Intermediate Microeconomics with Institutions (\~31 lectures, trimmable to 28) | 1–4, 6–11, 14–15, 17–19 |
| **B** | Political Economy and Public Finance (\~21 lectures)                           | 1, 5, 13, 15, 24, 26–30 |
| **C** | Industrial Organization and the Firm (\~24.5 lectures)                         | 1, 9–15, 17–19, 23      |
| **D** | Applied Policy Capstone (\~16.5 lectures)                                      | 1, 21–26, 32            |

Instructors may mix across tracks. A two-semester sequence is Track A, then a selection from Tracks B–D.

## Key Intellectual Commitments

1. Institutions are primary, not complications.
2. Demand curves, markets, and macro phenomena are social facts — emergent and real.
3. Equilibrium is a useful analytical tool, not a normative benchmark.
4. Competition is a process, not a market structure.
5. The firm is a central actor, not a black box.
6. Game theory is a tool, not a topic.
7. Knightian uncertainty threads through the book as connective tissue.
8. Economic rents are a cross-cutting lens for political economy.

## Chapter Architecture

Every chapter opens with an institutional vignette and then works the book's four recurring questions — *What problem exists? What institution addresses it? What role do prices play? Who captures the rents?* — before developing its core mechanism. Each carries at least two **"How We Know"** boxes walking through an identification strategy (85 in all), a **"Common Confusions"** box un-teaching habits from introductory courses, a summary and key-terms list, and problems tiered `[Core]` → `[Extension]` → `[Empirical]`: 121, 104, and 101 problems respectively, 326 in all. Starred sections (`§N.M*`) and the standalone appendices carry the formal derivations and can be skipped without loss of continuity.

## Instructor Materials

Solutions for the `[Core]`, `[Extension]`, and `[Empirical]` problems (121, 104, and 101) are available on request from <laurence@lwilsesamson.com>. They are not included in the student PDF or in this online edition. Numerical problems are worked to a figure; discussion problems are given the argument being tested and the misconception the question is designed to surface.

## Reproducibility

The book's source, figure-generation code, and PDF build are not published with this edition; they may be provided on request. Skip this section if you are reading the book rather than rebuilding it. The notes below describe how the figures and PDF are produced. The order of the printed PDF (front matter, part dividers and summaries, chapters, appendices, back matter) is defined in `build_pdf.py`.

### Repository layout

```
chapters/      32 chapters, preface, notation, detailed TOC, nine Part summaries (Core Concepts)
appendices/    31 mathematical appendices (Game Theory Toolkit 0A–0C with its index page,
               and 28 chapter appendices) + roadmap
figures/       123 figures as PDF and PNG (105 in chapters, 9 in appendices, 9 Part synthesis
               figures), one generation script each in figures/scripts/
references/    glossary (810 terms), consolidated bibliography (1,672 entries) and its build
               script, figure plan, and internal working notes (citation audit, review notes)
solutions/     instructor solutions for all three tiers, assembled from per-chapter parts
reviews/       manuscript reviews
build_pdf.py   pandoc + xelatex build of the single-file PDF
```

### Building

```bash
python3 build_pdf.py                        # full book -> political_economy_book.pdf
python3 references/build_bibliography.py    # regenerate the consolidated bibliography
python3 references/build_bibliography.py --check   # fail if any citation is unlisted
cd figures/scripts && python3 fig01_institutional_timeline.py   # regenerate one figure
```

These commands assume a copy of the source. The build requires `pandoc` and `xelatex`; figure scripts require `matplotlib`, `numpy`, `pandas`, and `scipy`. Every figure builds offline. Figure 22.2 reads the Autor–Dorn–Hanson "China Syndrome" replication archive (from ddorn.net, not distributed here) when it is present; otherwise it plots points recovered from an earlier archive-based rendering.

### Data and figures

Most figures are the author's illustrations of the models in the text, computed from the parameters given in their captions. The empirical figures draw on published sources named in each caption: Card and Krueger (1994, Table 3; Figure 2.5), Engel (1857) and the BLS consumer-expenditure benchmarks (Figure 3.4), the OECD Time Use Database (Figure 5.1), Gregory King's harvest table as printed in Davenant (1699; Figure 7.3), Bresnahan and Reiss (1991, Table 4; Figure 10.3), Kleven et al. (2019; Figure 13.4), Aghion et al. (2005, Table I; Figure 14.2), De Loecker, Eeckhout, and Unger (2020; Figure 15.4), Mehra and Prescott (1985, Table 1; Figure 21.3), the Autor–Dorn–Hanson replication archive (Figure 22.2), the Oregon Health Insurance Experiment papers (Figure 26.1), the 2024 federal tax schedules (Figure 30.1), published estimates of the social cost of carbon (Figure 32.2), and Saiz (2010; Figure 32.3). Figures labeled illustrative or schematic — the sheepskin profile (Figure 13.1), within-industry dispersion (Figure 9.3), the elephant curve after Lakner and Milanovic (Figure 25.3) — show the shape of a published finding, not its data. A figure plan in the source lists every figure with its source.

## About the author

I am an economist in New York. I am Associate Director at Oxford Economics, I teach as an adjunct at NYU Wagner and Columbia SIPA, and I am a Senior Research Fellow at the University of Johannesburg's Centre for Competition, Regulation and Economic Development. I took my PhD in economics at Columbia. More at [lwilsesamson.com](https://lwilsesamson.com/).

## How this book was made

I wrote this book with substantial help from AI language models, principally Claude (Anthropic), which I used for drafting, editing, checking mathematical derivations, literature synthesis, figure code, and consistency checking. The outline, the argument, the selection of material and the judgments throughout are mine, as is the responsibility for what remains wrong. Figures were generated from code using the sources identified in their captions; illustrative figures are labelled.

In October 2026 I revised the whole text in two further passes, also with AI help: one to remove the stock phrasing that AI drafts produce, and one to bring the prose closer to my own academic writing.

I then compared 607 checkable claims in the text (numbers, quotations, attributions, dates and reported findings) with a primary source, using AI tools for the lookups and reviewing each change myself. Of those, 524 were verified, 25 corrected, 10 softened, 1 removed, and 47 were unreachable. This was a claim-by-claim check, not a line-by-line proofread. Claims not in the ledger were not checked, and errors surely remain.

Please report errors to <laurence@lwilsesamson.com>. Corrections usually go live the same day.

*Last updated: November 2026*