a market to implement the core abstract i present a mechanism whose subgame perfect equilibrium outcomes coincide with the core of an underlying convex tu game the mechanism resembles an asset market in which one of the players is randomly selected as a broker who centralizes trade in addition the rules of the mechanism are independent of the coalitional function therefore the mechanism is useful for an incompletely informed designer who wishes to implement the core of these games the mechanism is inspired by the reduced games relevant for the consistency of the core journal of economic literature classification numbers c71 and c72

homo economicus and the reconstruction of political economy six theses on the role of values in economics this paper argues for an explicit engagement of political economy with values and presents a number of criticisms of the ethical limitations of both markets and neoclassical economics neoclassical theory is unlikely to be able to take on board this critique because of its commitment to homo economicus and the ideal of the market but this is not the case for political economy in the tradition of post keynesianism marxism and institutionalism the reason why political economy has not exploited this advantage to any great extent has to do with the fear of many political economists that an engagement with values necessarily diminishes the scientific status of their approach the paper presents six theses in order to convince them that this fear is fundamentally misconceived copyright 2005 oxford university press

the social structure of a national securities market in this article a national securities market the stock options market is characterized as a social structure represented by the networks of actors who traded options on the floor of a major securities exchange trading among actors exhibited distinct social structural patterns that dramatically affected the direction and magnitude of option price volatility the argument that this market is socially structured is constructed in four parts behavioral assumptions about the nature of economic actors models of micronetworks models of macronetworks and price consequences in the ideal typical model of the market actors are assumed to be hyperrational and never to act opportunistically with these behavioral assumptions the micronetworks of actors should be expansive a condition which would result in undifferentiated and homogeneous macronetworks such macronetworks would tend to reduce the volatility of option prices but in the empirical market studied here actors are subject to bounded rationality a

the new institutional economics this outstanding book presents new original contributions from some of the world s leading economists including ronald coase douglass c north masahiko aoki oliver e williamson and harold demsetz it demonstrates the extent and depth of the new institutional economics research programme which is having a worldwide impact on the economics profession

the hidden persuaders institutions and individuals in economic theory in his classic book the hidden persuaders vance packard claimed that large corporations manipulated consumers using advertising techniques john kenneth galbraith and others have repeated a similar view against this gary becker and george stigler have claimed that advertising is essentially informative rather than manipulative in contrast it is argued here that both of these opposed accounts of human agency neglect the more subtle and undesigned processes by which institutions bear upon and mould individuals this paper proposes a concept of reconstitutive downward causation in which institutions act upon individual habits and dispositions the mechanisms involved do not fall foul of past critiques of holism or methodological collectivism this argument involves a rehabilitation of the concept of habit in social science with far reaching implications

the psychology of early institutional economics the instinctive approach of thorstein veblen s conspicuous consumer theory abstract thorstein veblen a founder of original or old institutional economics combined social and evolutionary thought in his institutionalist approach to dealing with psychological social and economic issues the psychological content of veblen s writings takes instinct and habits into consideration the economic literature on the psychological content of veblen s writings has focused on habits despite the importance of instincts in veblen s works this paper attempts to discuss veblen s notion of instincts in order to make its role clearer in his approach to conspicuous consumer decision making it discusses the role of instincts the instinct of workmanship the relationship between habits and instincts and their influence on the conspicuous consumer consequently this paper contributes to a better understanding of how inner forces and socialization culminate in behavior in veblen s conspicuous consumer approach

nationalism development and integration the political economy of ernest gellner in this paper we show how in gellner we can find a stimulating analysis of the institutional equilibria that characterise agrarian and industrial society and the conditions that make possible institutional change from one equilibrium to another this allows a convincing account of the reasons why some countries industrialised before others and why nationalism had such an uneven impact on the development of market economies we consider the relation between gellner s analysis and other theories of organisation and point out how gellner can help to solve some paradoxes that arise in these theories we also argue that joining gellner s contribution to the analysis of the positional nature of status and power reinforces his conclusion about the necessary stagnation of agrarian societies and the necessary over accumulation of different forms of capitalism we conclude by examining the implications of his analysis for the process of globalisation and its challenge to national states

how not to sell nuclear weapons we consider situations where a sale affects the ensuing interaction between potential buyers these situations are modeled by assuming that an agent who does not acquire the object for sale incurs an identity dependent externality we construct a revenue maximizing auction for the seller we observe that 1 outside options and participation constraints are endogenous 2 the seller extracts surplus also from agents who do not obtain the auctioned object 3 the seller is better off by not selling at all while obtaining some payments if externalities are much larger than valuations

three problems of social organisation institutional law and economics meets habermasian law and democracy this paper attempts to identify certain implications of habermasian ethics for the economic analysis of law it does so by demonstrating a complementarity between the habermas of between facts and norms and the veblen ayres commons tradition s of economic analysis three unresolved problems of social organisation raised by the institutionalists are addressed the legitimacy of the status quo ante buchanan schmid the legitimacy of society s transaction structure klevorick and the problem of social order hobbes platteau discourse ethics demonstrates how these problems may be resolved the model of human agency adopted in institutional law and economics permits an easier fit with discourse ethics than would be possible with the neoclassical traditions

the family and the state the immaturity of children sometimes precludes efficient arrangements between children and parents or others responsible for child care the difficulty in establishing efficient relations within families provides the point of departure for our interpretation of the heavy state involvement in the family the authors believe that a surprising number of state interventions mimic the agreements that would occur if children were capable of arranging for their care many regulations of the family improve the efficiency of family activities these interventions include subsidies to education and training social security and other old age support subsidies to births laws that limit access to divorce and the sale of children and laws that require parents permission for early marriage and other choices of children families that leave bequests can force children to repay parents for investments in human capital by reducing bequests therefore these families do not underinvest in childrens human capital by contrast families that do not leave bequests often poorer families do underinvest in children the state may subsidize schools and other training facilities to raise investments in children by poorer families to efficient levels authors modified

the fate of easter island the limits of resource management institutions abstract malthus malthus thomas 1798 1970 an essay on the principle of population penguin new york believed that population growth will eventually lead to natural resource depletion economic and social collapse and population decline brander and taylor brander james a taylor m scott 1998 the simple economics of easter island a ricardo malthus model of renewable resource use american economic review 88 119 138 use a predator prey model with an assumption of an open access resource they show that the collapse of easter island could be explained by a malthusian trap combined with technical characteristics of the resources they suggest that institutional change such as assignment of property rights could potentially have averted the collapse of easter island in this paper we show that even if the islanders had complete assignment of property rights and implemented optimal resource management with infinite horizon or equivalently had a social planner that implemented such an optimal plan as in neoclassical welfare economics a similar boom bust cycle would have occurred

opportunism is not the only reason why firms exist why an explanatory emphasis on opportunism may mislead management strategy the object of the present essay is neither to overturn transaction cost economics nor to deny the reality of opportunism instead it is to question the explanatory role of the concept of opportunism in the transaction cost analysis of oliver williamson and his followers williamson has suggested that potential or actual opportunism emerges as the source of the transaction costs involved in monitoring and enforcing contracts on the contrary it is shown here that there are several additional and likely sources of contract default or incomplete performance williamson s explanatory concentration on opportunism thus misidentifies the reasons for different hierarchical governance structures in the real world as these additional sources are ignored the emphasis on opportunism can impair a true understanding of the inner workings of the firm and be a misleading guide for practical questions of organizational design and corporate strategy

market institutions trust and norms exploring moral economies in nigerian food systems informal market institutions and small scale traders are responsible for feeding nigerian cities this study analyses a range of economic relationships and institutions that have evolved in the context of inadequate formal institutions such as banks and legal contracts through examining both personal relationships and institutional based trust the paper explores the role of moral norms trust is shown to be related to sanctions information on other parties and a range of norms that are drawn on both calculatively and habitually the perceived moralities of different forms of institution such as credit systems trader associations and commission agents are also examined

farsighted coalitional stability abstract i define the largest consistent set a solution concept which applies to situations in which coalitions freely form but cannot make binding contracts act publicly and are fully farsighted in that a coalition considers the possibility that once it acts another coalition might react a third coalition might in turn react and so on without limit i establish weak nonemptiness conditions and apply it to strategic and coalitional form games and majority rule voting i argue that it improves on the von neumann morgenstern stable set as it is usually defined but is consistent with a generalization of the stable set as in the theory of social situations journal of economic literature classification numbers c70 c71

the law and economics movement in the last thirty years the scope of economics has expanded dramatically beyond its traditional domain of explicit market transactions today there is an economic theory of property rights of corporate and other organizations of government and politics of education of the family of crime and punishment of anthropology of history of information of racial and sexual discrimination of privacy even of the behavior of animals and overlapping all these but the last of law 2 some economists oppose this expansion in whole or more commonly in part 3 there are a number of bad reasons all i think closely related for such opposition and one slightly better one 1 one bad reason is the idea that economics means the study of markets so that nonmarket behavior is simply outside its scope this type of argument owes nothing really to economics but instead reflects a common misconception about language more specifically a failure to distinguish among three different types of word or concept the first type illustrated by the term marginal cost is purely conceptual the term is rigorously and unambiguously defined by reference to other concepts just as numbers are but again like numbers there is no observable object in the real world that it names try finding a firm s marginal costs on its books of account the second type of word illustrated by rabbit refers to a set of real world objects few such words are purely referential one can speak of a pink rabbit or a rabbit the size of a man without misusing the word even though one is no longer using it to describe anything that exists nevertheless the referential function dominates finally there are words like law religion literature and economics which are neither conceptual nor referential such words resist all efforts at definition they have in fact no fixed meaning and their dictionary definitions are circular they can be used but not defined 4 one cannot say that economics is what economists do because many noneconomists do economics one cannot call economics the science of rational choice either the word rational lacks a clear definition and passing that difficulty there can be noneconomic theories of rational choice in which few predictions of ordinary economics may hold for example because the theory assumes that people s preferences are unstable there can also be nonrational economic theories an example is the type of survival theory in industrial organization in which firms that randomly hit on methods of lowering their costs expand vis a vis their rivals another example is marxism one cannot call economics the study of markets either not only because that characterization resolves the question of the domain of eco judge u s court of appeals for the seventh circuit senior lecturer university of chicago law school 1111 e 60th st chicago il 60637 i thank gary becker frank easterbrook william landes geoffrey miller richard porter george stigler geoffrey stone and alan sykes for comments on a previous draft and nir yarden for research assistance see for example gary becker 1976 jack hirshleifer 1985 p 53 george stigler 1984 gerard radnitzky and peter bernholz 1986 2 for a recent conspectus of economic analysis of law see my book 1986 3see for example ronald coase 1978 coase is of course a leading figure in the economics of property rights so his opposition is far from total 4for an excellent discussion see john ellis 1974 ch 2

structure and strategy within heterogeneity multiple dimensions of regional networking steiner m and ploder m structure and strategy within heterogeneity multiple dimensions of regional networking regional studies clusters are highly differentiated across sectors regions and countries both theoretical and empirical approaches therefore have to avoid universalization based on recent approaches various forms of network relations and possible contents of interactions of firms connected with knowledge exchange are elaborated it is argued that these interactions are distinctively structured that the diffusion of knowledge is highly selective and strongly dependent on the position of firms within networks and on their absorptive capacity by applying network analysis to different dimensions of interactions between firms it is shown that physical linkages within the medium technology cluster under scrutiny are rather weak that interactions based on different forms of knowledge exchange are denser and that direct links to the science base seem to be more prominent than long term su

lock in institutions and efficiency abstract economists who emphasize path dependence generally dispute at first approximation the effectiveness of rational choice in understanding institutions such economists belonging to the original old institutional economics and the historical school maintain that the constraint function is riddled with inefficient technologies and institutions which agents fail to replace with superior ones even when the switching cost is clearly lower than expected benefit the argument ultimately rests on a theory of action a la herbert simon where agents become habituated for whatever is the default institution such a theory recognizes that agents are ready to replace habits with more viable ones but only when agents face shocks or crises such recognition though necessarily allows rational choice in the sense of responsiveness to incentives to enter from the rear window after all shocks and crises are merely severe incentives

institutional labor economics the new personnel economics and internal labor markets a reconsideration the author illustrates the utility of institutional labor economics and makes a case for a reconsideration of it two recent developments motivate this effort the rise of new personnel economics npe as a significant subfield of labor economics and the substantial shifts in work organization that have taken place since the 1990s understanding how and why firms have reorganized work opens the door for a renewed interest in institutional approaches the author explains that the rules of institutional labor markets ilms emerge from the competition between organizational interest groups unions personnel professionals and the government and competing views of firms objectives resulting in the rise of ilms the slow diffusion of high performance work systems strategies used to obtain a high level of commitment from workers the use of contingent employees and the spread of new promotion rules in response to equal employment opportunity pressures as such the role of power and influence in establishing work rules is of central concern though more conventional npe considerations also remain important

thorstein veblen and post darwinian economics thorstein veblen is noted for his view that economics should be an evolutionary science however although the term evolutionary has been adopted in general terms by subsequent institutional economists there has been remarkably little detailed exploration informed by biology of what veblen meant by an evolutionary science and the character of the post darwinian economics that he attempted to build this essay explores the reasons for veblen s attachment to darwinism informed by developments in biology itself and identifies some distinctive and enduring features of veblen s evolutionary theory copyright 1992 by oxford university press

inward looking policies institutions autocrats and economic growth in latin america an empirical exploration this paper explores the institutionaldeterminants of economic growth in latinamerica by taking advantage of recentempirical research that employs subjectiveand objective measures to test for apossible northian explanation that linksinstitutional quality and economic growth we explore a simple framework that may helpbetter understand the policymakers choicesand persistence regarding inward lookingpolicies that were pursued between the1930s and the 1980s by arguing that in thelatin american case olson s 1982 idea ofencompassing interest should be expanded tocover not only the economic stakes of powerholders but in particular their psychicincome which includes their politicalstakes along the lines of recent work byrobinson 1997 coyne 2002 andothers

the assessment trade and location this paper gives an overview of different analyses of the effects of globalization on industrial location it suggests that comparative advantage is inadequate to explain several aspects of the changing patterns of trade and location and that it needs to supplemented by approaches based on new economic geography and theories of cumulative causation copyright 1998 by oxford university press

cornelius castoriadis on institutions a proposal for a schema of institutional change the paper presents the thought of the political philosopher cornelius castoriadis on institutions and argues that his insights contribute significantly to the development of a theory of institutions and institutional change which moves beyond the neoclassical framework stylised facts of historical experience such as strong path dependence and lock in effects and the diversity of observed institutional forms are explained naturally in his proposed framework in addition a schema for institutional change is suggested which accommodates a number of other strands in the literature as special cases this schema could be elaborated in various directions and facilitates structuring the further development of an alternative institutional theory

the development of the neoclassical tradition in labor economics this essay on labor economics examines neoclassical theory s rise to ascendancy following the second world war with a secondary focus on the relative decline but continued influence of institutionalist economic theory the authors describe the evolution of institutional and neoclassical theory from the late nineteenth to mid twentieth centuries examine some early intellectual debates between the two camps briefly describe the work of neoclassical labor economics pioneers and look at major developments over the past 30 years they argue that neoclassical economists increasing intellectual breadth and influence in public policy have led them to pay closer attention to issues that have long been of concern to institutionalists and neoinstitutionalists

meta analysis of economics research reporting guidelines meta regression analysis mra can provide objective and comprehensive summaries of economics research their use has grown rapidly over the last few decades to improve transparency and to raise the quality of mra the meta analysis of economics research network maer net has created the below reporting guidelines future meta analyses in economics will be expected to follow these guidelines or give valid reasons why a meta analysis must deviate from them

national institutional differences and cross border university industry knowledge transfer abstract does inter national institutional difference hamper technology transfer from the foreign university to the business enterprises a multinational study on institutions suggests that some elements of institutions of nations positively influence international technology transfer some other elements of institutions negatively influence the international technology transfer and yet some other elements of institutions of nations have no influence on the international technology transfer the empirical analysis on six institutional dimensions reveals variegated results i religious distance has a positive effect on international technology transfer when listed companies are controlled ii social distance has a positive effect when listed firms are not controlled iii education distance has a positive effect when listed companies are not controlled iv political distance has no effect on international technology transfer and vi industrial distance has negative effect on international technology transfer however hofstede s measures on national cultural dimensions show no significant effects the non significant results could be due to the measurement of national cultures characteristics of the biopharmaceutical industry or due to changes in the patterns of national cultures over time

sustainability and the anchoring of capital negotiations surrounding two major urban projects in switzerland theurillat t and crevoisier o sustainability and the anchoring of capital negotiations surrounding two major urban projects in switzerland regional studies this article deals with the anchoring of mobile financial capital in the city and urban sustainability illustrated by a case study in the swiss context it develops the theory that new forms of negotiation are appearing around urban projects development construction firms are playing a central role they are capable of evaluating and translating the multiple dimensions of a project and certain sustainability challenges into financial terms in a way that permits the anchoring of capital in the city in parallel the issue of sustainability depends greatly on the capacity of the local actors to negotiate with the promoters of urban projects

fair payments for efficient allocations in public sector combinatorial auctions motivated by the increasing use of auctions by government agencies we consider the problem of fairly pricing public goods in a combinatorial auction a well known problem with the incentive compatible vickrey clarke groves vcg auction mechanism is that the resulting prices may not be in the core loosely speaking this means the payments of the winners could be so low that there are bidders who would have been willing to pay more than the payments of the winning bidders clearly this unfair outcome is unacceptable for a public sector auction recent advances in auction theory suggest that combinatorial auctions resulting in efficient outcomes and bidder pareto optimal core payments offer a viable practical alternative to address this problem this paper confronts two critical issues facing the bidder pareto optimal core payment first motivated to minimize a bidder s ability to benefit through strategic manipulation through collusive agreement or unilateral action we demonstrate the strength of a mechanism that minimizes total payments among all such auction outcomes narrowing the previously broad solution concept second we address the computational difficulties of achieving these outcomes with a constraint generation approach promising to broaden the range of applications for which bidder pareto optimal core pricing achieves a comfortably rapid solution

plea bargaining and prosecutorial discretion a model of plea bargaining with asymmetric information is presented the prosecutor s private information consists of the strength of the case while the defendant s private information consists of h is guilt or innocence in equilibrium a fraction of cases are dismis sed because they are too likely to involve an innocent defendant in the remaining cases the prosecutor s offer of a sentence in exchange for a plea of guilty reveals the strength of the case it is shown t hat unlimited prosecutorial discretion may be socially disadvantageou s since it carries with it the requirement of sequential rationality copyright 1988 by american economic association

farmers marketing preferences in local coffee markets evidence from a choice experiment in ethiopia this study investigates transactions in the local coffee markets in ethiopia while the ethiopian commodity exchange which was established in 2008 introduced regulatory institutional and organizational innovations in the coffee market informal norms and conventions remain the primary institutions governing transactions in the local markets based on a choice experiment we found that for coffee farmers the characteristics of the traders are more important than the price offered when anchoring their transactions into personal relationships this can be explained as the institutional response of farsighted calculative farmers to poorly organized coffee markets and to lacking credit and insurance markets contrary to the concept of embeddedness which claims that economic transactions are embedded into social relationships social relationships are observed to be embedded into economic relationships one of the perverse effects of these personal relationship based transactions is that farmers are insufficiently incentivized to maintain and improve coffee quality

effect of information formats on information services analysis of four selected agricultural commodities in the usa we analyze sources of information in agricultural markets to understand patterns of demand for decision support services and the division of labor in the supply of these services information formatting qualitative variation that determines accessibility and relevance of information in specific contexts prohibits universal access to informational content information formats give rise to both transaction costs and complementarities reflected in patterns of information exchange in commodity systems controlling for actors structural roles and levels of education we develop a hedonic model of information demand such that actors seek information that is formatted to meet their needs and capabilities employing survey data we explain elements of observed patterns of information exchange in four commodity systems in the usa results point to opportunities to expand our understanding of socioeconomic processes underlying production and consumption of decision support

steady change the 200 largest us manufacturing firms throughout the 20th century this paper discusses the existence of structural change in business activity and technological competence among the 200 largest us manufacturing companies throughout the 20th century the data were taken from chandler scale and scope 1990 and fortune magazine the analysis of corporate evolution in used to assess continuity versus turbulence of business organizations in the context of the neo schumpeterian long wave hypothesis the empirical results show that the giants of the late 20th century are not the same as those at the beginning of that period persistence in the sample is very limited moreover turbulence is not smooth but rather occurs by impulses that affect specific industries and it has increased over time overall the pattern of corporate entry and industry development is very indicative of the new opportunities emerging with information and communication technologies this process of open ended continuous transformation supports the case for putting change at the centre of economic analysis

towards alternative trajectories reconfigurations in the dutch electricity regime abstract in the early 2000s dutch electricity companies are increasingly investing in technologies that enable them to replace coal with biomass replacing large amounts of coal up to 40 requires the companies to invest in technological trajectories alternative to the ones they have supported over the past decades this paper aims to understand why these incumbent firms in the dutch electricity regime are developing alternatives the second aim of the paper is to provide a way for assessing the potential of innovations the paper does so by bringing together insights from literature on socio technical regimes and insights from literature on technological and market niches strategic niche management the main conclusion is that both niche processes at the level of experimenting with alternatives and changes in the incumbent regime are necessary for understanding the innovation journey of a new technology a two by two matrix is developed that can be used for both analysis and governance purposes

on categorical variables and non parametric statistical inference in the pursuit of causal explanations this paper proposes a pragmatic alliance between critical realism and non parametric statistical techniques in pursuit of causal explanations of economic phenomena by retroductive means the alliance depends on clarifying the interpretive requirements for forming categories within nominal or classificatory scales or as ordinal or ranking scales it also depends on establishing the scope of demiregularities as something to be explained and as something that allows a rough and ready extension of experimental conditions the roughness and readiness of demiregularities is matched by the assumptions and conditions of non parametric analysis

quadratic core selecting payment rules for combinatorial auctions we report on the use of a quadratic programming technique in recent and upcoming spectrum auctions in europe specifically we compute a unique point in the core that minimizes the sum of squared deviations from a reference point for example from the vickrey clarke groves payments analyzing the karush kuhn tucker conditions we demonstrate that the resulting payments can be decomposed into a series of economically meaningful and equitable penalties furthermore we discuss the benefits of this combinatorial auction explore the use of alternative reserve pricing approaches in this context and indicate the results of several hundred computational runs using cats data

resale markets and the assignment of property rights the consumption of an indivisible good causes identity dependent externalities to non consumers we analyse resale markets where the current owner designs the trading procedure but cannot commit to future actions we ask the following questions 1 doer the identity of the initial owner matter for the determination of the final consumer 2 is the outcome always efficient the major conclusion of our paper is that the irrelevance of the initial structure of property rights arises in resale processes even if there are transaction costs that hinder efficiency this result complements the coasian view where the irrelevance of the assignment of property rights is a consequence of efficiency

2 the institutional structure of production 1 prize lecture to the memory of alfred nobel december 9 1991 this abstract was borrowed from another version of this item

the microfoundations project in general equilibrium theory the author 1 argues that the long lived microfoundations project based on general equilibrium models has come to an end and 2 shows that non walrasian models intended to provide microfoundations for macroeconomics are inadequate the arguments are derived from the sonnenschein mantel debreu smd demonstration of the arbitrariness of aggregate excess demands in general equilibrium models of the walrasian arrow debreu mckenzie type the issues raised have significance for the proper method of modeling macroeconomic phenomena for instance the smd results have led a growing number of general equilibrium theorists to make assumptions concerning macroeconomic structure in order to analyze other regularities at the macro level these points validate the position that systematic macroeconomic phenomena are intrinsically macroeconomic copyright 1994 by oxford university press

statehood experience legal traditions and climate change policies this study investigates how the implementation of modern climate change policies is related to former colonies length of state history and their legal heritage we argue that countries with longer statehood experience around the time of colonization were better equipped to implement the legal philosophies transplanted by their colonial powers therefore the implications of receiving british common law versus french civil law should be particularly important in countries with a greater accumulated history of statehood using a cross section of up to 78 former colonies our results provide support for this hypothesis in particular our estimates demonstrate that common law countries have weaker modern climate change policies than civil law countries and the difference is inflated by a longer statehood experience measured by the length of state history from 1 to 1800 ad legal origin has no effect in areas which by the time of colonization had no statehood experience finally we report similar results for the pattern of labor market regulations jel k15 k31 k32 o44 q54 q58

a critical realist interpretation of evolutionary growth theorising the article discusses a critical realist interpretation of evolutionary growth theorising by focusing on some of its basic characteristics the evolutionary ontology is complex differentiated structured systemic open ever changing and radically uncertain its methodology tends to be increasingly based on appreciative theorising retroductive explanations and interdisciplinary analysis after discussing these features the article suggests that critical realism may indeed constitute an important philosophical and methodological foundation for the future development of evolutionary theories of economic growth

what marshall didn t know on the twentieth century s contributions to economics some of this century s many valuable contributions to economics like macroeconomics econometrics and game theory are widely recognized however arguably equally important is the enhanced role of empirical study permitted by more abundant data and improved methods also insufficiently recognized are the increased rigor and use of applied economics in public finance regulation corporation finance etc employing abstract theory and sophisticated data analysis the striking contrast with earlier intuitively based applied economics and empirical study is illustrated comparison with marshall s principles also indicates that except for macroeconomics remarkably little space in today s texts deals with some of the rich contributions of this century what has twentieth century economics accomplished a great deal as will be shown here but the discussion needs an illuminating starting point in 1946 after arriving at the london school of economics as an entering graduate student 1 i soon found that in

making sense of institutions as a factor shaping economic performance abstract there has recently been a resurgence of interest in how institutions affect economic performance a review of this literature reveals that the concept of an institution means different things to different scholars both within economics and across the social sciences we discuss what factors unify the different definitions of institutions and develop a concept of institutions useful for the analysis of economic performance and economic growth in particular specifically we develop the notion of institutions as standard social technologies economic growth results from the co evolution of physical and social technologies

industry evolution in varieties of capitalism a comparison of the danish and us wind turbine industries in this study we combine klepper s framework on the evolution of industries with the varieties of capitalism approach to argue that industry evolution is mediated by institutional differences we expect that new industries will evolve with a stronger connection to established industries in coordinated marked economies than in liberal market economies our assumptions are supported by the survival analysis of us and danish wind turbine manufacturers from 1974 to 2014

rationality of self and others in an economic system in this paper i want to disentangle some of the senses in which the hypothesis of rationality is used in economic theory in particular i want to stress that rationality is not a property of the individual alone although it is usually presented that way rather it gathers not only its force but also its very meaning from the social context in which it is embedded it is most plausible under very ideal conditions when these conditions cease to hold the rationality assumptions become strained and possibly even self contradictory they certainly imply an ability at information processing and calculation that is far beyond the feasible and that cannot well be justified as the result of learning and adaptation let me dismiss a point of view that is perhaps not always articulated but seems implicit in many writings it seems to be asserted that a theory of the economy must be based on rationality as a matter of principle otherwise there can be no theory this position has even been maintained by some who accept that economic behavior is not completely rational john stuart mill 1909 bk 2 ch 4 argued that custom not competition governs much of the economic world but he adds that the only possible theory is that standard economic doctrine makes assumptions of rationality that have very strong implications for the complexity of individuals decision processes the most complete assumptions of competitive general equilibrium theory require that all future and contingent prices exist and be known in fact of course not all these markets exist the incompleteness of markets has several side consequences for rationality for one thing each decision maker has to have a model that predicts the future spot prices this is an informational burden of an entirely different magnitude than simply optimizing at known prices it involves all the complexity of rational analysis of data and contradicts the much praised informational economy of the price system it is also the case that equilibria become much less well defined similar problems occur with imperfect competition this research was supported by the office of naval research grant onr n00014 79 c 0685 at the center for research in organizational efficiency institute for mathematical studies in the social sciences stanford university stanford california

organizations firms and institutions in the generation of innovation abstract the purpose of this paper is to develop the innovation system analysis by bringing together the institutional and organizational dimensions of the process of innovation at the firm level the objective is to start elaborating a systemic theory of innovation in firms the paper summons up the contributions and limits of organizational and institutional approaches to innovation this preliminary investigation leads to a series of relevant questions in a second section an attempt is made to overcome the dichotomy and make progress towards a more exhaustive and better articulated representation of the innovation process considered at the firm level

rising metropoli the geography of mergers and acquisitions in germany high levels of mergers and acquisitions m as were a characteristic of the global economy in the 1990s the overall effects of m as on economic welfare and their spatial implications however remain a profoundly neglected topic using three standardised indices representing the relative quantity of take overs in each german regierungsbezirk the paper demonstrates that the recent wave of m as has resulted in a major concentration of firms and economic activity in the main german metropoli the paper then turns to a study of the flows of m a transactions by means of regression analysis it identifies the main drivers of the geographical concentration of firms to be indicators of the general level of agglomeration i e regional gdp and population and the concentration of political power in the region the results also indicate that investment in r d the general level of education or unemployment when considered in combination with agglomeration indicators play a negligible role in determining m a f

ethics politics and nonsatiation in consumption a synthesis in contrast with the production of goods and services by firms where the production costs are minimized under appropriate behavioral assumptions consumer producers in neoclassical theory maximize consumption expenditure i e production costs of their outputs according to kenneth boulding were the impact upon the limited resources available on planet earth taken into account consumption expenditure should be minimized we propose that we keep consumer theory as a reasonable description of reality however we should evaluate the long run consequences of such postulated behavior in a larger context which as a consequence of larger population with increasing per capita consumption comprises the overburdening of natural resources by decomposing the time horizon of cultural evolution into shorter periods of adjustment we may then distinguish several types of institutional determination of how societies take decisions as a group and individually the consumer theory simply reflects the predominant ethical values of which ideologies political platforms and demand patterns are shorter run adjustments

the left and organized labor in low inflation times this article presents fresh empirical data showing that policy alignment between center left governments and trade unions was a sustained feature of european politics between 1974 and 2005 this contradicts expectations of a wide delinkage between the electoral left and labor as a consequence of globalization deindustrialization and unionization decline however structural economic change has altered the policy field so that sustained policy alignment can no longer be explained by existing theoretical frameworks based on a theoretical argument and a multivariate empirical test the article contends that policy alignment is likelier to occur if labor plays an important role in economic management at the microlevel and the industry level and if unions are politically cohesive agents thanks to powerful confederation leadership supported by democratic decision making practices in making its case the article bridges the literatures on comparative capitalism and party politics in order to account for change and continuity in policy making processes

trust networks and norms the creation of social capital in agricultural economies in ghana this paper contributes to the continuing debate over the multifaceted concept of trust and its ability to provide a richer explanation of processes of economic activity using case studies of agricultural production marketing and financing systems in brong ahafo region of ghana the analysis documents the means by which trust is created among farmers traders and agricultural input suppliers the mechanisms include formal and informal networks of working relations customer friendships pre existing networks and intermediaries the study shows that trust is necessary for the development of a vibrant private sector based on microenterprises in conditions where actors cannot rely on formal legal institutions at present

information and the coase theorem abstract some economists think the coase theorem implies a lot about the proper scope of government intervention in the economy and about the welfare consequences of laissez faire others see it as a mere tautology that if people negotiate efficiently then every outcome will be efficient the coase theorem is important only if we believe that efficient negotiation is likely of course we can attribute inefficiencies to bargaining imperfection but it may not be useful to do so such attitudes sometimes seem to depend more on ideology than on reason this article gives one economist s reasoned view it discusses the coase theorem as a decentralization result and why decentralization results are interesting it considers mechanism design for revealing private information and describes the problems of centralization should the coase theorem should be viewed as a second best result property rights are more efficient than some reasonable alternative does the coase theorem recommend an institution or make

allocative efficiency of markets with zero intelligence traders market as a partial substitute for individual rationality we report market experiments in which human traders are replaced by zero intelligence programs that submit random bids and offers imposing a budget constraint i e not permitting traders to sell below their costs or buy above their values is sufficient to raise the allocative efficiency of these auctions close to 100 percent allocative efficiency of a double auction derives largely from its structure independent of traders motivation intelligence or learning adam smith s invisible hand may be more powerful than some may have thought it can generate aggregate rationality not only from individual rationality but also from individual irrationality

a noncooperative view of coalition formation and the core a noncooperative implementation of the core is provided for games with transferable utility the implementation obtained here is meant to reflect the standard motivation for the core as closely as possible in the model proposed time is continuous this idealized treatment of time is most amenable for capturing an essential feature of the core there is always time to reject a noncore proposal before it is consumated

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

the approach of institutional economics this paper assesses the old institutional economics it emphasizes the importance of key old institutionalist themes concerning the necessity of habits and rules and the role of institutions a problem in the alternative theoretical program of the new institutionalism is the untenability of its assumption of an original institution free market or state of nature even optimizing behavior requires the prior existence of habits and rules although it still lacks a complete and systematic theory the evolutionary approach of the old institutionalists tackles the problem of the interactive relationship of actor to structure without analytical reduction to one or the other

institutional individualism and institutional change the search for a middle way mode of explanation after noting the lack of enthusiasm of several well known scholars concerning the adoption of both methodological holism and methodological individualism in its several versions this paper shows that institutional individualism is a different mode of explanation from both of these and also that it is not the same thing as the so called popperian programme of situational analysis institutional individualism is a mode of explanation that yields non systemic and non reductionist explanations at the same time as it allows for the incorporation into economic theories and models of the many formal and informal institutional aspects surrounding all human interactions whether these interactions take place within stable structures of legal rules and social norms or whether they attempt to change the said rules and norms finally the paper shows that it is possible for old institutionalists to make institutional individualist analyses of institutional changes while retaining the remaining methodological assumptions of the school the same is true for new institutionalists some examples are offered from both camps copyright 2001 by oxford university press

package auctions and exchanges we report recent advances concerning the package allocation problem in which traders seek to buy or sell combinations of goods the problems are most difficult when some goods are not substitutes in that case competitive equilibrium typically fail to exist but the core is non empty and comprises the competitive solutions also in that case the vickrey auction fails to select core allocations and yield revenues that are less than competitive the ausubel milgrom auction generally selects core allocations and when goods are substitutes prescribes the vickrey allocation we also evaluate the problems and promise of mechanisms for the package exchange problem

land use compatibility change and policy at the rural urban fringe insights from social capital cerning the level and quality of services to be provided in the community pendall and martin lacayo nonfarm development also impacts agriculture with the loss of farmland and the difficulties of farming amidst a large nonfarm population receiving considerable attention by citizens policy makers and academics american farmland trust successfully managing changes at the ruralurban interface requires improved data technical expertise and political leadership at all levels of government success also depends we believe on the existence of social capital in this article we focus on the importance of social capital in managing change at the rural urban interface our starting assumption is that individuals or communities with access

institutions in economics the old and the new institutionalism 1 definitions and issues 2 formalism and anti formalism 3 individualism and holism 4 rationality and rule following 5 evolution and design 6 efficiency and reform 7 conflicts and complementarities

the core of a continuum economy with widespread externalities and finite coalitions from finite to continuum economies abstract when permissible coalitions in finite economies are constrained to be small relative to the player set the continuum model with finite coalitions and its f core are the limits of large finite economies and their e cores we show convergence both of game theoretic structures relatively small coalitions in the finite economies converge to finite coalitions and of solutions e cores converge to the f core our convergence is carried out in the context of exchange economies with widespread externalities where the requirement that coalitions be small is critical

institutions economics and the development quest institutions crucial for the analysis of how agents deal with uncertainty have been gaining increasing relevance on the economic research agenda in this paper we analyze the institutional literature aiming to explain why this perspective obtains better results than others in development economics in particular we stress the relevance of new institutional economics as an adequate framework for a broad understanding of development issues

reconsidering institutional labor economics the author illustrates the utility of institutional labor economics and makes a case for a reconsideration of it two recent developments motivate this effort the rise of new personnel economics npe as a significant subfield of labor economics and the substantial shifts in work organization that have taken place since the 1990s understanding how and why firms have reorganized work opens the door for a renewed interest in institutional approaches the author explains that the rules of institutional labor markets ilms emerge from the competition between organizational interest groups unions personnel professionals and the government and competing views of firms objectives resulting in the rise of ilms the slow diffusion of high performance work systems strategies used to obtain a high level of commitment from workers the use of contingent employees and the spread of new promotion rules in response to equal employment opportunity pressures as such the role of power and influence in establishing work rules is of central concern though more conventional npe considerations also remain important

rational choice the contrast between economics and psychology rational choice the published record of a conference on economics and psychology frames the issues as a contest between economic theory and the falsifying evidence from psychology according to a third perspective that of experimental economics most standard theory provides a correct first approximation in predicting motivated behavior in laboratory experimental markets but the theory is incomplete particularly in articulating convergence processes in time and in ignoring decision cost this view has roots in the work of herbert simon and sidney siegel but it is not plainly represented in contemporary research in economic pyschology

a pedagogical treatment of bilateral monopoly most economists are familiar with the concept of bilateral monopoly an upstream monopolist sells its output to a single downstream buyer that may also be a monopolist in its output market the theory of bilateral monopoly has a rich history that can be traced to the writings of cournot 10 and menger 31 over the 150 or so years that the problem has been under consideration however economists have offered a variety of solutions ranging from a completely determinate intermediate good price and output to a completely indeterminate solution within a specified range interestingly this historical divergence of opinion concerning the correct outcome under bilateral monopoly still persists a clear consensus has not yet emerged surprisingly this lack of unanimity exists despite the fact that bowley 5 provided the theoretically correct solution in 1928 2 even more surprising however is the apparent popularity of the incorrect solution a recent survey of the population of intermediate microeconomic texts on the authors bookshelves revealed that over 80 percent of the current treatments of this topic are in error 3 table i presents the results of that survey those authors who present a correct analysis of bilateral monopoly recognize that optimality requires joint profit maximization this leads them to the correct conclusion regarding the determinate quantity of the intermediate product exchanged of the five treatments we have classified