This paper supports the effort by Hindriks and Guala (2014) to integrate the prevailing accounts of institutions. I illustrate with traffic narratives how we can think of their concept of rules-in-equilibrium as evolving from universal elementary forms. These conceptions resonate fully with Smith (1759) who saw rule-following conduct as the basis of human sociality and action.

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.

This paper is about the mind of the embedded individual in heterodox economics. Beginning from Margaret Archer's analysis of modes of reflexivity and following the respective contributions of Geoff Hodgson and John Davis, the paper seeks to integrate into Archer's approach a place for habitual beliefs and an analysis of the ‘relative autonomy’ of the embedded individual. Archer's identification of modes of reflexivity is endorsed but her avoidance of any dispositional place for habit in the mind is questioned. It is argued that by excluding habits in this way, Archer, unlike Davis, implausibly assumes most individuals have achieved relative autonomy in their group associations. The essay develops an approach to the mind that articulates underlying relationships between habits and internal conversation, potentially enriching Archer's explanation of modes of reflexivity while locating Davis's notion of relative autonomy within that framework. Specific economic implications are then briefly considered.

That governance within the firm is deliberate, conscious and hierarchical, based on authority is considered almost axiomatic. Chester Barnard is cited as an early theorist of this view. In this short article we review Barnard's original theory of authority, his later work and his private correspondence with F. A. Hayek, Michael Polanyi, Bertrand de Jouvenal and others. We show that Barnard focused in his later thinking less on authority and more on ‘responsibility’ and on the spontaneous nature of coordination within the firm, argued for ‘invisible hand’ explanations of coordination within the firm and compared coordination within the firm to market coordination. We use this information to produce novel insights into the work of Chester Barnard and also to demonstrate that his insights into the inner workings of firms is still not completely understood or reflected in the literature on the firm.

This paper reviews work that tests (1) how formal and informal institutions, and especially their interaction, affect participation in the shadow economy in transition countries; and (2) how participating in these shadow economies affects individuals' well-being. The key findings are that a clash of individuals' perceptions of formal institutions with their informal institutions increases involvement in the shadow economy. Conversely, a trustworthy relationship with the government and other individuals makes people more inclined to comply. The importance of their social and institutional context also appears in how individuals' involvement in the shadow economy relates to their well-being. These findings complement insights from the rich literature on tax morale, on the exchange between public institutions and citizens and between culture and institutions more generally. The findings also contribute to the institutional economic literature by empirically showing that: (1) focusing on formal institutions alone, that is strengthening the rule of law, is a necessary but insufficient response to the shadow economy; (2) taking informal institutions, such as individuals' trust and tax morale, into account is of equal importance; and (3) most importantly, formal and informal institutions go hand in hand, and their interaction should be an essential part of the new institutional perspective.

We study the value of the political connections of directors on Chinese boards. We build a new dataset that measures connections of directors to members of the Politburo via past school ties, and find that private firms with politically connected directors in the boardroom get on average about 16% higher subsidies over sales per firm (7 million yuan). Connected state-owned enterprises (SOEs) access debt at 11% cheaper cost, which translates into average savings of close to 32 million yuan per firm in lower interest payments. We find that the value of the political connections persisted after the anti-corruption campaign (ACC) of 2012. It became weaker for the cost of debt in SOEs, but stronger for subsidies to private firms. We argue that the value of connections in the private sector increased after the ACC because they became a less risky alternative to corruption. We also show that connected firms do not perform better.

We can all agree that institutions matter, though as to which institutions matter most, and how much any of them matter, the matter is, paraphrasing Douglass North's words at the Nobel podium, unresolved after seven decades of immense effort. We suggest that the obstacle to progress is the paradigm of the New Institutional Economics itself. In this paper, we propose a new theory that is: grounded in institutions as coevolving sources of economic growth rather than as rules constraining growth; and deployed in dynamical systems theory rather than game theory. We show that with our approach some long-standing problems are resolved, in particular, the paradoxical and perplexingly pervasive influence of informal constraints on the long-run character of economies.

The Covid-19 pandemic in 2020 led to extensive new government regulations and lockdown policies that, according to some prominent definitions, severely reduced economic freedom. However, many of these new pandemic-related regulatory restrictions on economic freedom are largely missed by the Economic Freedom of the World Report (EFW). This paper first adjusts the Our World in Data Covid-19 Stringency Index into a measure of lockdown regulatory freedom and then merges it into the EFW index to better measure countries' 2020 cross-sectional relative economic freedom. We find significant differences in the relative ranking of economic freedom between countries once we adjust for lockdown regulatory restrictions.

Louisiana consistently ranks as one of the most corrupt states in the nation. In fact, the Pelican State is the most corrupt state when looking at the most common indicator of corruption: corruption convictions per 100,000. What is less clear about Louisiana is how the state became corrupt. This paper seeks to provide the missing link. I argue that the high levels of corruption in the state can be explained by its origins in French civil law. This historical influence has perverse and persistent effects on the state, despite occurring over 200 years ago. Through these origins in civil law, corruption in Louisiana impacts its economic institutions. These institutions then lead to a variety of other bad outcomes in the state such as a high dependency on oil and low incomes. This argument implies that resource dependency is bad for development only when institutional quality is low. By linking legal origins to corruption, institutions, and economic outcomes, I seek to offer a clearer explanation for why Louisiana sets itself apart from other states in its politically corrupt environment.

This paper uses the concept of “Personnel is Policy” to extend the theory of regulatory capture to the political appointment of agency commissioners. The “Personnel is Policy” theory provides three important insights. First, it shows that whether or not an interest group benefits from a regulatory agency depends on the particular individuals appointed to run it. Second, the president plays an important role in regulatory capture by nominating individuals to be appointed to the commission. Third, regulatory capture does not follow a pre-determined path because the commissioners continually change. The theory is then used to explain the early years of a prominent regulatory agency created during the Progressive Era: the Federal Trade Commission. From the perspective of the big business “trust” interest group, their success at capturing the FTC to achieve their goals of controlling competition and blocking hostile antitrust actions was largely a result of who was appointed to the commission. The trusts were the most successful during the years of 1915–1916 and 1925–1929.

The new institutional economics has emphasized the importance of ideology in determining the content and direction of institutional change. Ideology can also determine when interest groups succeed in achieving legislative favor. The case of the regulation of in-kind wages in Britain shows that factors highlighted in mainstream political economy (such as interest group strength and organization, self-interest of legislators, and coalitional partners) were important. However, the interaction between relative price changes and social ideology was also significant in explaining the shape and timing of legislative changes. Changes in relative prices gave labor groups the incentive to seek legal protection from non-monetary wages, but they obtained protection only if they met certain criteria established by the prevailing ideology. Changes to that ideology resulted in further legislative changes granting cash wages to most industrial workers.

Posner considers purposeful organisations. Legal persons are fictitious non-mortal species whose evolution has played a major role in economic development. In what sense can they be said to have a purpose? Thanks to several important mutations, the status of legal persons was transferred from public bodies to business corporations. This evolutionary journey is complementary to the Coasian view, which, moving in the opposite direction, explains the firm as a centralization of market transactions. If the corporation emerged also from a process of decentralization of public attributes, some features of public legal persons, are lacking in its business mutation. Also some ways of motivating people are only available to the original species.

Pablo Paniagua and Veeshan Rayamajhee (2021) propose an Ostromian polycentric view on coronavirus disease-2019 (COVID-19) preventative measures co-produced by the state and citizens. I argue that we should also use another Ostromian approach – ‘crafting of institutions.’ Focusing on the crafting of cognitive institutions allows us to understand the co-production of virus containment in all its complexity. Combining the ‘crafting cognitive institutions’ and ‘boosting’ approaches will allow for the creation of institutionally and behaviorally informed anti-COVID policy interventions in line with polycentric pandemic governance.

This paper will propose a comparative analysis of the conceptualization of colonisation that could shed light on the contemporary economic analysis of the colonial legacy in Africa. More specifically, this article will propose a return to old debates on colonisation, with a special focus on French 19th century political economy. Three main institutionalist lessons can be drawn from a careful analysis of French colonial economics of the 19th century. First, by institutions, the authors referred not only to the modes of colonisation – liberalism or collectivism? – but also to the actors: What should be the respective role of states and of private actors (entrepreneurs, banks, settlers) in the colonisation of Africa? Second, the colonial debates involved a discussion of property, whether in the sense of land ownership (individual vs. collective) or under the prism of property rights. Third, the analysis of the colonisation of Africa by French economists reveals an understanding of institutions as cultural values, norms or even racial attributes.

This paper is a contribution to the advancement of a naturalistic social ontology. Individuals participate in an institutionalized practice by following rules. In this perspective, I show that the nature, the stability, and the dynamics of any institution depend on how people reason about states of affairs that do not occur. That means that counterfactual reasoning is essential in the working of institutions. I present arguments for the importance of counterfactuals as well as a game-theoretic framework to account for them. Since the role of counterfactuals does not directly transpire in people's behavior, the whole discussion can be seen as a broad argument against behaviorism in philosophy and the social sciences.

How do gifts relate to formal and informal institutions? Giving gifts, especially in the form of anti-poverty aid, opens the givers to a serious social dilemma: the Samaritan's dilemma. We explain how the Church of Jesus Christ of Latter-day Saints uses a mixture of formal and informal governance to provide sustainable social welfare programs that avoid this dilemma. These institutions not only govern aid arrangements, but also provide governance across the entire Church community, encouraging religious adherence and broad-based participation.

In this paper, we examine the bi-directional relationship between financial globalization (proxied by foreign direct investment (FDI) flows) and economic institutions (proxied by central bank independence (CBI)) taking into consideration the role of political institutions. We test our argument on a sample of 48 African countries (1970–2012) using a two-step System Generalized Methods of Moments, with collapsed instruments and Windmeijer robust standard errors. Using two proxies for CBI, the study finds that while legal CBI does not have a significant impact on FDI, high central bank governor turnover rates have a significantly negative impact on FDI inflows. However, higher levels of political institutions significantly enhance the impact of legal CBI on FDI inflows, and dampen the impact of high central bank governor turnover rates on FDI inflows. The study also shows that, higher FDI inflows have a significantly positive impact on both legal and de facto CBI. This impact is accelerated in countries characterized by higher levels of political institutions.

Digital markets offer abundant free content but exhibit extreme concentration among content aggregation intermediaries. These characteristics are linked. Weak copyright environments select against stand-alone content-delivery structures and select for bundled aggregation structures in which free content for users promotes positively priced advertising and data-collection services for firms. Dominant intermediaries promote commoditization, and the reallocation of market rents from content producers to content aggregators, through litigation and free content distribution that weaken copyright protections. The potential net welfare effects raise concern. Network effects, compounded by weak inventory constraints, scale economies, and learning effects, promote winner-takes-all outcomes in the intermediary services market while weak copyright may generate output distortions in the content production market.

This comment relates to Richard Posner (2010), the lead article for this issue. Posner applies ‘the principles of organization economics’ to the study of diverse types of organizations. His study comparing the FBI to other types of police organization is important and compatible with the study of urban policing in American metropolitan areas. Many policy prescriptions are based on an inadequate understanding of the diversity of urban public good production functions and a lumping together of every type of police service. A brief review of research related to the concept of polycentricity as related to urban services in metropolitan areas is provided as a way of further illustrating Posner's concern that finer distinctions need to be made in the way scholars analyze organizational economics.

This brief note is a commentary on Hendriks and Guala's (2014) unification of the institutional theories of Lewis, North, and Searle. It argues that the equilibrium theory of Lewis is fundamental and that the kind of equilibrium best suited in this role remains the orthodox notion of Nash.