Does inequality affect outcomes? To answer, we use the microcosm of Olympic competitions by asking whether a country's level of inequality diminishes its performance. If it does, is it conditional on institutional factors? We argue that the ability of economically free societies to win medals will not be affected by inequality. In these societies, institutions generate incentives to invest in the talents of individuals at the bottom of the income distribution (potential athletes otherwise constrained in the ability to expend resources on training). These effects mitigate those of inequality. The incentives that promote investments in skills across the income distribution are weaker in unfree societies and they cannot mitigate the effects of inequality. Using the Olympics of 2016 in combination with the Economic Freedom data, we find that inequality only matters in determining medal numbers for unfree countries. We link these results to inequality and its effects on economic outcomes.

People have rights to the degree that they are willing to claim them and are able to enforce them, either themselves or through a third-party enforcer. This economic theory of rights is based on the rights people actually do have and are able to exercise, not the rights they should have based on some normative criteria. Natural rights theories and contractual rights theories are examined and found to be ambiguous as to the actual rights they imply. Furthermore, there is no assurance that people will actually be able to exercise any natural rights or agreed-upon rights. People's actual ability to claim and enforce rights is based on the economic and political power they have, which in turn is based on their ability to provide benefits to others in exchange for others respecting the claimed rights, and in some cases being willing to use force to make others respect them.

This study examines the type and quality of institutions in Palestine and the correlation between the institutions and economic growth in Palestine from 1516 to 1948. Initially in the 16th century, with the Ottoman conquest of the area, institutions in Palestine involved de facto private user-rights. The level of expropriation by elites was low, and this enabled the people to develop the lands that they had acquired the right to cultivate. In the 17th and 18th centuries, with the exception of the Galilee in the middle of the 18th century, institutions became extractive due to tax farming, rapacious governors and Bedouin raids. From the middle of the 19th century until 1948, there was a second reversal back to private property institutions, first slowly until the First World War, and then more rapidly under the British Mandate after the First World War. When there were private property institutions the economy prospered, while when there were extractive institutions, the economy stagnated.

This paper explores associations between disturbances and cooperative responses in a selection of irrigation associations from Spain. Transaction costs and collective action theories are used to characterize disturbances and responses. Disturbances are characterized by looking at the uncertainty they generate, their frequency, the distance of the transacting partners they affect, and their impact on asset-specific transactions. Responses are assessed based on the collective action tasks they involve and classified into coordination and cooperation responses. A qualitative comparative analysis confirms two pathways that are sufficient for the emergence of cooperation responses. The first path is congruent with transaction costs theory, and points to disturbances that are frequent and asset specific; the second path supports relational theory, and points to disturbances that emerge progressively from within the system. Other patterns include the tendency of irrigation associations to delegate to external entities when disturbances are external and occur frequently; and the adaptation of existing institutions when the disturbances are internal and progressive.

This paper seeks to answer the question of what psychological preconditions must exist for institutions to determine behaviour and order our societies. We defend the notion that institutional theory may gain from such a contribution. We introduce a new theory of the mind as a network structure within which the psychological process operates to integrate insights from cognitive and affective psychology into institutional theory. We discover that institutions must be expressed as rules in mental networks which guide thinking and behaviour, be embedded within a cognitive apparatus such that they are called to mind by perception to so guide thinking and behaviour and be anchored to emotion such that they are endowed with urgency in order for them to have a hold on individual behaviour. From this theory we derive definite predictions, as well as policy insights.

This article investigates farm investment behaviour and the presence of soft budget constraints in the agricultural sectors of three Central and Eastern European countries – Estonia, Hungary and Slovenia – using individual farm accountancy panel data for the 2007–2015 period. Gross farm investment is positively associated with gross farm investment for the previous year, growth in real sales and public investment subsidies. Mixed results for debt square and cash flow variables imply that the different investment behaviour of farms pertains to different structures of investment sources among the countries under analysis. A particularly significant negative cash flow coefficient implies strong soft budget constraints for Estonian farms, while insignificant cash flow coefficients imply weak soft budget constraints for Hungarian and Slovenian farms.

Since the early 1980s a wave of liberalizing reforms has swept over the world. Using panel data from 30 European countries in the period 1993–2015, we test the hypothesis that such reforms have led to voter dissatisfaction with democracy, since, it is argued, they have been undertaken in a non-transparent way, often during crises, and they have entailed detrimental consequences. The reform measures are constructed as distinct changes in four policy/institutional areas: government size, the rule of law, market openness, and regulation. Our results indicate that while reforms of government size are not robustly related to satisfaction with democracy, reforms of the other three kinds are – and in a way that runs counter to anti-liberalization claims. Reforms that reduce economic freedom are generally related to satisfaction with democracy in a negative way, while reforms that increase economic freedom are associated positively with satisfaction with democracy.

This paper addresses a specific institution, the Protected Designation of Origin (PDO) in wine markets. To understand the present strategic choices in the context of the globalization of wine markets, the paper seeks to explain the economic logic of this specific institution, its genesis and its evolution. Using an evolutionary games approach, we build an evolutionary model of the strategic determination of quality. Four configurations emerge. The PDO can be related to signals and policies of quality in strategic situations. This study also yields general results for use in the evolutionary analysis of other institutions.

Since the end of the shakeout following the bursting of the dot com bubble, we have seen substantial innovation in the institutions and organizational arrangements used to finance early-stage high growth technology companies. This paper will document the emergence of business accelerators, angel groups, micro venture capital funds and online equity crowdfunding platforms, and show the rapid growth in angel investing over this period. It will also document the corresponding movement away from traditional venture capital activity at the early stage of company development. The paper will explain how technological advance, specifically the decline in the cost of bringing a new software product to market, has driven this shift in the institutions of early-stage finance.

We examine how variation in antisemitism across countries can be explained by economic freedom. We propose two mechanisms. First, the more economic freedom, the greater the scope of market activities. If people perceive Jews as particularly skilful at doing business at the expense of others, a greater reliance on markets can increase antisemitism. Second, a key type of institution undergirding the market is an effective and fair legal system, or the rule of law. The stronger the rule of law, the smaller the risk for exploitative behaviour, and the less hostile people will be towards groups seen as exploiters. If Jews are seen as such, more economic freedom reduces antisemitism. We use the ADL Global 100 survey of antisemitic attitudes and relate them, for up to 106 countries, to the Economic Freedom of the World index and its five areas. Our empirical findings confirm the two predictions: The more economic openness, the more antisemitism; and the stronger the rule of law, the less antisemitism. These findings indicate a complex relationship between markets and attitudes towards Jews.

There are few concepts that are more central to natural resource management than those of property and property rights. Given their importance, it might be expected that there would be some consensus in the economic literature about what property and property rights are. However, no such consensus seems to exist. In fact, different authors use the same terms to denote quite disparate concepts and ideas, impeding rather than advancing progress in understanding natural resource management. As but one example, there is hardly a concept that has been as fundamentally misunderstood as that of the commons. That misunderstanding notwithstanding, there is another, less familiar, more common and even more fundamental one: the persistent confusion of possession with property. This article argues that the distinction between possession and property is of particular importance for comprehending the meaning of institutional shifts from one resource management regime to another. It therefore reviews concepts central to natural resource management, by distinguishing between state, private, common property and possession on the one hand and open access on the other.

The paper builds an integrative framework of the moral dimensions of the employment relationship by linking the core specificities of the employment relationship, i.e. the meaningfulness of work, its relational components, the incompleteness of the labour contract and its authority character, to the four moral motives identified by the Moral Foundations Theory, namely care, fairness/reciprocity, in-group/loyalty and authority. We show that due acknowledgement of the moral dimensions of the employment relationship entails making institutional transformations, namely strengthening rather than discarding employment law and reforming corporate law. Recognizing these moral dimensions would epitomize a radical break with mainstream economics and neo-liberal thought.

This contribution commemorates Oliver Williamson, who recently passed away, as one of the founding fathers of Transaction Cost Economics (TCE). It does so by touching on some of the details of his personal life and connecting these with his professional career. The latter was devoted to putting the study of institutions on the economic agenda. Closer scrutiny reveals that three phases may be identified. Williamson first developed an interest in analysing vertical integration. During the second phase, he elaborated this interest in TCE, and during the third, he positioned his contributions within the area of institutional economics. Furthermore, the article considers the various influences of institutional and organizational economists on Williamson. Finally, the article considers the reception, criticism, and further elaborations of Williamson's contributions.

Yoram Barzel was always aware that competition is ubiquitous and takes many forms, and he was among the first to analyze settings where individuals compete on the basis of time, rather than price. This paper applies his insights to study the Oklahoma land rushes, where thousands of individuals raced to establish property rights to land. A simple modification of Barzel's analysis generates a model of rationing by racing, and we test its predictions using new data on the timing and location of over 73,000 homestead claims within the five distinct land rushes and one lottery. We find that increases in land quality or decreases in the cost of racing generate corresponding increases in the equilibrium speed, implying that potential rents are dissipated by investments in speed. The analysis highlights the lasting significance of Barzel's insights regarding non-price competition.

To be effective, an army must contain the extent of desertion among its ranks. This phenomenon rose to particular prominence in Europe during the 18th and 19th centuries, with the appearance of the figure of the “citizen-soldier” on the battlefield. This paper offers the first theoretical treatment of the issue of desertion from an economic perspective. Building on the work of Yoram Barzel on the “economic analysis of property rights,” we develop a “desertion as theft” framework. We then test the empirical implications of the framework against qualitative and quantitative evidence from Napoleonic France.

This paper argues that technological advance is a necessary condition for sustained economic growth. Technologies and institutions co-evolve in a system of mutual causation. Although some institutions inhibit growth while others encourage it, no single institution is either necessary or sufficient to produce sustained growth. However, some non-unique bundle of encouraging institutions is necessary. Sustained growth began with the Industrial Revolutions that did not just ‘fall out of the blue’ but were instead the culmination of three trajectories of technological advance in steam power, electric power, and the mechanization of textile manufacturing. These stretched over several centuries. Growth then became sustained when the West ‘invented how to invent’. A necessary condition for the Industrial Revolutions was Western science whose roots lie as far back as the scholastic philosophers and the medieval universities. Its absence elsewhere is a sufficient reason why no other place developed its own indigenous industrial revolution.

For two decades, economic agents have been investing in the personal data-driven industry on the assumption that courts, the keepers of the legal systems, would have backed their claims, turning their technological control of personal data into legally protected property rights. Courts' backing has proved only temporary as they are now revising early solutions by constraining collection, use, and trade of personal data to protect the hierarchically superior rights. The theory of ‘legal bubbles’ rationalizes the economics underlying the legal shockwaves affecting the personal data-driven economy. ‘Legal bubbles’ tend to arise when economic agents invest in the economic exploitation of a new resource in a context of uncertainty and ignorance about the legal implications of innovative activities. These legal foundations may eventually turn out to be unstable as a result of courts' ex-post attempt to re-adapt them to the previously ignored implications of unconstrained commodification, with disruptive economic consequences.

Alfred Marshall was elected to the Chair of Political Economy at the University of Cambridge in December 1884. He gave his inaugural lecture on ‘The present position of economics’ on 24 February 1885 (Groenewegen, 1995: ch. 10). An abridged version of this lecture is presented below.

This introduction considers the overall character and impact of the work of Elinor Ostrom (1933–2012). Her work is not only inter-disciplinary in character; it also bridges ‘original’ and ‘new’ traditions within institutional economics. Her studies of the governance of common-pool resources inspired multiple lines of enquiry in economics and other social sciences. It also carves out a policy approach that surpasses the market–state dichotomy. This broad impact is evidenced in the seven essays collected and introduced here.

Antony (Tony) M. Honoré was born in London in 1921 but was brought up in South Africa. He served in the British Army during the Second World War and was severely wounded in the Battle of El Alamein in 1942. After the war, he continued his studies at New College, Oxford, and he has lived and taught in Oxford for well over half a century, holding fellowships at several Oxford colleges. From 1971 to 1988, he was Regius Professor of Civil Law and a Fellow of All Souls College in Oxford. He is internationally known for his work on ownership, legal causation, and Roman law.