Institutions, Markets, and Economic Performance: Implications for Cuba

An important aim of this paper is to increase the level of rigor that we use to understand the role of the state as an institution determining the economic performance of other institutions. More specifically, we seek to increase our understanding of the role of the state in determining the economic performance of two distinct type of markets: “spontaneous” markets and “socially contrived” ones. Thus, in the next section we identify the main characteristics of these two types of markets. We then discuss in detail the role of the state in these two types of markets by identifying the specific services that the state provides and how they improve the functioning of the two types of markets. Sometimes these services have been referred to as market augmenting services in the new institutional economics literature. In general they are considered to be public goods.