This thoroughly revised, extended and updated edition of a critically acclaimed textbook provides an accessible and cohesive introduction to the burgeoning discipline of institutional economics. Requiring only a basic understanding of economics, this lucid and well-written text will be essential reading for undergraduate and postgraduate students wanting to understand the problems of the real world - such as entrepreneurship, innovation, the cost of the welfare state, international financial crises, and economic development. As institutional economics is now revolutionising policy making, the book can also serve as a guide to the pressing problems facing policy makers in mature and emergent countries alike. Key features include: A short \`Primer\` at the beginning of each chapter to highlight the main issues and their relevance. Key Concepts such as \`institutions\`, \`economic order\`, \`coordination costs\`, \`competition\` and \`public policy\` are highlighted and clearly defined. International coverage is ensured as the three authors, experienced academic teachers, work in the US, Europe and the Asia Pacific.