Nobel Laureate in Economic Sciences Elinor Ostrom's authoritative book Governing the Commons, published in 1990, and almost every other text she has published on the subject of the commons, strongly criticized Garrett Hardin's much-cited 1968 Science article “The Tragedy of the Commons.” Hardin's “tragedy” refers metaphorically to the eventual destruction of a commons as a result of collective overuse. Hardin claimed that statist solutions and privatization provisions are the only two policy means for addressing the tragedy. Ostrom explored user self-governance as a third alternative to avert the tragedy. Ostrom's exploration and her critical stance, however, have caused the misperception of her work as anti-Hardin, anti-tragedy, or more specifically, anti-statist and anti-privatization. This paper argues that despite Ostrom's clear criticism of Hardin's claim and her regard for user self-governance or community-based management, her work was not anti-statist or anti-privatization.

Modern theory identifies several sources of economic growth, such as capital accumulation, new techniques, secure property rights and contracts, and absence of rent seeking. This paper introduces new social technologies as yet another source of growth and emphasizes our incomplete knowledge of social systems. I introduce a framework for analyzing institutional policy and use the case of modern biotechnology to explain how uncertainty about social technologies, persuasion, and competing beliefs influence the evolution of property rights.

It is argued that routines can be fruitfully conceived of as multilevel mechanisms. The merits of viewing routines as multilevel mechanisms are that it helps in putting together a coherent picture of what routines are, what routines do, and how they do it. In particular, it helps in getting a clearer picture of how skills and routines are ontologically (rather than metaphorically) related to each other. It allows us to see that while routines are generative mechanisms producing recurrent patterns of firm behavior, as multilevel mechanisms they themselves are at the same time recurrent patterns of interaction within firms. Because of its ‘behavioral’ spirit, viewing routines as multilevel mechanisms (rather than as, for example, unobservable dispositions of firms to energize patterns of behavior in firms) greatly facilitates further empirical research on crucial, as yet unresolved issues, such as how stable and robust routines are and to what extent firm behavior is routine.

The core problem of any group selection hypothesis is the possibility that pro-social individual behavior contributing to a selection advantage for the group as a whole is potentially subject to free-riding. If group behavior and, hence, the conditions for group selection change through imitation and migration between groups, as argued in Hayek's theory of societal evolution, the explanation of group selection needs to account for the individuals' cognitively reflected motivation to adopt pro-social behavior in the face of free-riding. To do so a game-theoretic model is suggested that incorporates observational learning as a mechanism of acquiring, and choosing between, strategies.

This article is a reply to the comments made on my target article, ‘Institutions and Economic Development: Theory, Policy and History’, at the beginning of this issue.

How did the evolution of the rule of law become stunted in Sicily during the 19th century? The work of economist Yoram Barzel, particularly his property-rights approach to understanding the political economy of state formation, is uniquely suited to understanding the failure of Italy's unification process to secure the rule of law in Sicily during the 19th century. This failure can be explained by a lack of a credible commitment to the rule of law in the state formation process. I argue that this lack of credible commitment manifested itself in the abolition of previously existing parliamentary institutions as an independent collective action mechanism, as well as prior constitutional agreements that existed in the Kingdom of Sicily. The resulting uncertainty over the security and legal definition of property rights over land raised the transaction costs of competing for resources through productive specialization and market exchange. In turn, it reduced the relative costs of competition for land ownership and the use of enforcement through other means, such as rent seeking or organized crime.

This paper advances and defends the proposition that the basis for the evolution of institutions is the evolution and competition of ideas in the public sphere. This is based on a deeper proposition that institutions are ideas and ideas become institutions. We draw on the ‘Brisbane School’ of evolutionary/institutional economics and of behavioural/psychological economics to investigate the microdynamics of the competition of ideas in the public sphere, which has been studied at a macroscopic level by Isabel Almudi, Francisco Fatas-Villafranca and Jason Potts. The theory we develop gives us a new vision of institutional evolution as emerging from the microdynamics of the evolution and competition of ideas in the public sphere, and a new foundation for institutional theory. It gives us a new vision of the microdynamics of institutional evolution, the evolutionary fitness of ideas for competition in the public sphere and the likely path of institutional evolution.

Institutions affect economic outcomes, but variation in them cannot be directly linked to environmental factors such as geography, climate, or technological availabilities. Game theoretic approaches, based as they typically are on foraging only assumptions, do not provide an adequate foundation for understanding the intervening role of politics and ideology; nor does the view that culture and institutions are entirely socially constructed. Understanding what institutions are and how they influence behavior requires an approach that is in part biological, focusing on cognitive and behavioral adaptations for social interaction favored in the past by group selection. These adaptations, along with their effects on canalizing social learning, help to explain uniformities in political and social order, and are the bedrock upon which we build cultural and institutional variability.

This essay comments on discussions of the future of evolutionary economics by Winter (2014) and Witt (2014). I agree with their assessment of evolutionary economics as a theoretically fragmented field that has had little success in effecting a paradigm shift in mainstream economics. However, I question if such a paradigm shift should be the primary goal of evolutionary economists. I argue that evolutionary economists could increase their impact if they would be willing and able to recast themselves as evolutionary social scientists. This was the vision for economics that Veblen held out more than a century ago. I lay out the theoretical building blocks for realizing this vision available today.

In his seminal 1921 book, Risk, Uncertainty, and Profit, Frank Knight distinguished uncertainty and risk. This paper applies Knight's concept of uncertainty to knowledge generated in incumbent organizations to explain the inherent difficulty in assessing potential innovations along with the key role played by knowledge spillover entrepreneurship as a conduit for transforming new knowledge created by an incumbent organization but ultimately commercialized through the creation of a new firm and innovation. Knowledge is inherently uncertain and constitutes what is characterized as the knowledge filter impeding innovative activity in the context of incumbent firms and organizations. The organizational and institutional context and market uncertainty can either facilitate or impede the spillover of knowledge from the firm where it was created to the entrepreneurial startup where it is transformed into innovation. The empirical evidence based on a large, unbalanced panel of 9,126 UK firms constructed from six consecutive waves of a community innovation survey and annual business registry survey during 2002–2014. Implications for managers, scholars, and policymakers are provided.

Constitutional scholars emphasize the importance of an enduring, stable constitutional order, which North and Weingast (1989) argue is consistent with credible commitments to sustainable fiscal policies. However, this view is controversial and has received little empirical study. We use 19th-century US state-level data to estimate relationships between constitutional design and the likelihood of a government default. Results indicate that more entrenched and less specific constitutions are associated with a lower likelihood of default.

This paper aims at offering a reconstruction of the salient features of the most important formal institution introduced by European states in the Early Modern Period with the aim of recognizing and protecting the intellectual property of the inventors. Such institutions went under different names – ‘Privilegio’ in Venice, ‘Patent’ in England, ‘Privilège’ in France, ‘Cedula de privilegio de invençion’ in Spain – and, in general, took the form of the concession of a special prerogative to the inventor by the sovereign or the republic, by virtue of which he could exploit, in economic terms, his own invention through holding a monopoly. The article starts with the origins of the privileges for invention, of which the first examples are to be found in the Middle Ages, but whose official ‘genesis’ is commonly identified with the Venetian law of 1474. The fundamental characteristics of the Venetian system, which was later imitated by other European states, are analysed. In the following section, the adoption of this model by those other states – Spain, France, England, and the Netherlands – is illustrated. In fact, the majority of these would make legislation on intellectual property an instrument of mercantilist policy, under the same conditions as prevailed in Venice. Further, we will examine some of the opportunities that the diffusion of these measures offered to those involved and the way in which they – as craftsmen, merchants, and speculators – took advantage of the business of privileges. Finally, before concluding, some thoughts on the changes made in the policy of privileges given the transformations that took place in the course of the eighteenth century, in order to understand the ‘adaptive’ capacity of these institutions.

In this study, we investigate the mediating effect of institutional networking on the relationship between perceived corruption and the growth of small and medium-sized enterprises (SMEs). We also examine the moderating impact of financial slack on the relationship between perceived corruption and institutional networking. We test our moderated mediation model using data from 212 SMEs operating in Ghana. The findings from the study show that perceived corruption is positively related to institutional networking and this relationship is amplified when levels of financial slack are greater. The findings also show that institutional networking positively mediates the relationship between perceived corruption and SME growth. Theoretical and practical implications are discussed.

Venture capitalism is a major institutional innovation based on identifying economies of scope in transactions of technological knowledge, bundled with managerial competence, reputation, screening procedures, and equity. It has paved the way to the emergence of new surrogate markets for knowledge, i.e. financial markets specialized in trading knowledge-intensive property rights. This development has important benefits in terms of risk management and hence profitability of investments in high-tech start-ups. The dynamic efficiency effects of the new institution also derive from the fact that the public at large, through its investments in knowledge-based income streams, contributes to the creation of new economically useful knowledge and capabilities.

Roughly 50 years ago, the eminent German philosopher and social scientist Hans Albert presented a critique of ‘Model-Platonism’ in economics to describe essential elements of the ‘neoclassical style of economic reasoning’. Specifically, Albert advanced a series of epistemological arguments to illustrate conceptual shortcomings in neoclassical theory, which may be utilized to immunize the latter against conflicting empirical evidence. This article summarizes Albert's main arguments and illustrates his most important insights by using simple propositional logic. Based on these findings, a clarification and definition of ‘Model-Platonism’ is offered and the applicability of the Model-Platonism-critique to current developments in mainstream economics is assessed. Finally, two possible extensions of Albert's argument, the concepts of oscillating informational content and axiomatic variation, are illustrated with respect to their potential for immunization against critique.

This paper investigates the relationship between judicial resources and individuals’ trust in the justice system. We argue that the justice budget is likely to have a positive and significant impact on individuals’ trust in justice, thanks to its role as a signal when individuals face uncertainty regarding the judicial environment. We test this hypothesis empirically using three different budget-related variables: the justice budget per incoming case, the number of magistrates and the intensity of legal aid. Across our three regressions, we find a positive and significant correlation between judicial resources and individuals’ declared trust in the justice system. This positive relationship is robust to the introduction of socio-demographic, cultural, institutional and economic control variables. We finally offer empirical support to the intuition that the effect of the justice budget on trust in justice is likely to be greater when individuals are more satisfied with the level of democracy in their country.

The main objective is to discuss the historical-evolutionary character of the latest work of Douglass North. His views have been lately criticized, especially as far as their historical insight is concerned, as well as the nature of the concepts and the ideas he used. Three interconnected arguments dealing with North's neoclassical roots, his individualistic point of departure and his inclination to universalistic explanations sustain this allegation, and they will be presented in the first part. In the second part, a response to these arguments is suggested. Finally, the evolutionary character of his later work is discussed and established in the last part. It is held that by introducing ‘culture’ into the heart of the analysis of institutional change, North is oriented toward context dependent and consequently historically specific explanations.

Little is known of why institutional transfers have been largely disappointing. Berkowitz et al. (2001) have argued that because of what they call the transplant effect, imported law lacks effectiveness unless there is an initial level of familiarity or the imported law is successfully adapted to local legal norms. Yet, history shows that institutional transfers are possible: Why have some countries been more successful than others in importing foreign institutions? The paper introduces a framework for the analysis of the transplant effect, which is based on institutional economics. In the second part, we investigate the case of Borno State in northeastern Nigerian where institutions transferred during colonial rule and upon independence have been largely ineffective. In the case of Borno, the lack of a European educated bureaucratic class, low commitment of the political leadership, generally low levels of education and urbanization contributed to the low effectiveness of imported institutions.

We illustrate mechanisms that can give rise to path dependence in legislation. Specifically, we show how debtor-friendly bankruptcy law arose in the United States as a result of a path dependent process. The 1898 Bankruptcy Act was not regarded as debtor-friendly at the time of its enactment, but the enactment of the law gave rise to changes in interest groups, changes in beliefs about the purpose of bankruptcy law, and changes in the Democratic Party's position on bankruptcy that set the United States on a path to debtor-friendly bankruptcy law. An analysis of the path dependence of bankruptcy law produces an interpretation that is more consistent with the evidence than the conventional interpretation that debtor-friendliness in bankruptcy law began with political compromises to obtain the 1898 Bankruptcy Act.

What do regulations in the developing world tell us about the internet economy? In this paper, we argue that the ways in which developing nation states adjust to and legislate the internet depends upon whether they possess a national planning strategy for international data traffic. Focusing our attention on the global trade of intangible goods in Iran, we aim to demonstrate that digital protectionism causes, to varying degrees, suppression, censorship, and the violation of freedom of speech and other civil rights on the internet. Our results show that digital protectionism generated an emergence of domestic start-ups, with companies, such as Facenema and Soroush, operating in the Iranian market in the absence of global rivals such as Facebook and WhatsApp. Yet, digital protectionism and sanction-induced barriers have triggered social problems, besides the emergence of parastatals, securing the economy to an inefficient social and economic path towards digital development.