The Role of Institutions in Economic Development: The Case of Iran

This article examines the role of institutions in economic development from a new perspective based on the social contract between the government and the individuals in any society. The basic element in this social contract is to improve the living standards of all the members of society, as it is impossible to imagine that a rational society would vote for the deterioration of the well-being of its members. Meanwhile, the laws enacted by the governments disrupt economic activities at times and create rent for some interest groups in society. In this regard, the necessity of forming institutions to observe the element of justice in economic and financial laws is revealed. Therefore, the role of private sector associations in forming collective bodies gains further significance. We also discuss the role of private sector associations in Iran in formulating rules, regulations, and laws.