In recent years, there have been major advances in the empirical analysis of the link between institutions and development. However, a number of methodological problems – both theoretical and empirical – remain unresolved and have been well articulated by Ha-Joon Chang in his article ‘Institutions and Economic Development: Theory, Policy and History’. These problems raise valid concerns about the policy relevance of the evidence arising from the studies. A more reliable approach to study the link between institutions and development and overcome the inherent problems of cross-country empirical analysis is to direct focus to microeconomic analysis of institutions. Such an approach avoids ideologically driven normative judgments about the superiority of particular institutional arrangements and also offers a more credible and tractable avenue to investigate institutional change.

This paper combines the property rights approach of Barzel with models from renewable resource and evolutionary economics to examine the domestication of wild animals. Wild animals are governed by weak property rights to stocks and individuals while domesticated animals are governed by private ownership of stocks and individuals. The complex evolutionary process of domestication can be viewed as a conversion of wild populations into private property, as well as a transition from natural selection to economic selection controlled by owners of populations and individuals. In our framework domestication is not the explicit goal of any economic agent, but it emerges as a long-run outcome of an innovation in hunting strategies in a hunter–gatherer society. Our formal model also suggests that the domestication process moves slowly at first but then proceeds rapidly, and is aligned with the archeological evidence on domestication events.

The sharing economy has raised hopes that online platforms will usher in a new era of sharing, even though economic theory suggests that income growth may reduce sharing in the long run. This paper presents evidence that that high-income people are less likely than low-income people to use traditional institutions for sharing goods, including carpools, multi-person households, and garage sales. While it first appears that high-income people are equally likely to use new institutions, such as Craigslist, Airbnb, and Zipcar, this partly reflects the fact that many low-income households in the US still lack an internet connection. Conditional on having internet access, this paper finds that online sharing platforms are also disproportionately used by the poor. The future of sharing likely depends on countervailing forces. Economic growth may continue to dampen incentives to share goods, but this effect could be offset by the proliferation of institutions, norms, and preferences that facilitate sharing.

Ha-Joon Chang, in his article ‘Institutions and Economic Development: Theory, Policy and History’, argues that the institutions and development literature is theoretically and empirically flawed, trapped by a failure to account for the contextual factors that influence the institutions that drive development. These judgments emerge from a lack of appreciation of the methodological standards of that literature and, especially, from a description of the institutions and development literature that few contributors to it would recognize. At the same time, despite the emphasis he gives to contextual factors, his critique ignores the role of politicians and the progress made in the institutions literature in understanding their incentives to pursue development.

In his recent book on Property, Power and Politics, Jean-Philippe Robé makes a strong case for the need to understand the legal foundations of modern capitalism. He also insists that it is important to distinguish between firms and corporations. We agree. But Robé criticizes our definition of firms in terms of legally recognized capacities on the grounds that it does not take the distinction seriously enough. He argues that firms are not legally recognized as such, as the law only knows corporations. This argument, which is capable of different interpretations, leads to the bizarre result that corporations are not firms. Using etymological and other evidence, we show that firms are treated as legally constituted business entities in both common parlance and legal discourse. The way the law defines firms and corporations, while the product of a discourse which is in many ways distinct from everyday language, has such profound implications for the way firms operate in practice that no institutional theory of the firm worthy of the name can afford to ignore it.

In multilevel marketing companies (MLMs), member-distributors earn income from selling products and recruiting new members. Successful MLMs require a social capital structure where members can access and mobilize both strong and weak social ties. Utah has a disproportionate share of MLM companies located in the state and a disproportionate number of MLM participants. We argue that Utah's dominant religious institutions have led to the emergence of a social capital structure, making MLMs particularly viable. Utah is the most religiously homogeneous state; roughly half its population identifies as members of the Church of Jesus Christ of Latter-day Saints (LDS Church). The LDS Church's institutions foster a social capital structure where (almost all) members have access to and can leverage social capital in all its forms. LDS institutions encourage members to make meaningful social connections characterized by trust and reciprocity with other church members in local neighborhoods and across the world.

Werner Sombart was a leading member of the German historical school in the later decades of its existence. This movement is conventionally divided into two: the ‘older historical school’ beginning with Wilhelm Roscher (1817–1894) and others in the 1840s, and the ‘younger historical school’ beginning with Gustav Schmoller (1838–1917) in the 1880s. The German historical school lasted until the devastations of the Nazi period and the Second World War.

This paper proposes an information perspective on path dependence. From this perspective, historical paths are important insofar as knowledge about them shapes current decisions, for better or worse. A key consideration is the extent to which relevant information is fully inscribed in the existing configuration of state variables, including organizational structures and institutional norms. Using a chess analogy, path dependency arises whenever a decision maker's ‘move’ depends not only upon existing state variables, but also knowledge of the path by which this configuration came about. This chess analogy is then extended to various institutional contexts such as legal expungement of criminal records, patient privacy rights, and corporate executive succession strategies. A formal notation is introduced to specify this definition more precisely, and to compare it with other perspectives on path dependency, such as lock-in effects, increasing returns to scale, ergodic equilibria, and generalized notions that ‘history matters’.

In this comment, we respond to comments raised by Eastwood (2012) in response to our article on the role of evolutionary psychology in understanding institutions (Boyer and Petersen, 2012). We discuss how evolutionary psychological models account for cultural variation and change in institutions, how sociological institutionalism and evolutionary models can inform each other, how evolutionary psychological models illuminate the role of power in institutional design and the possibility of a ‘general theory’ of institutions.

The use of information technology in healthcare has accelerated progress toward the long-term goal of a learning healthcare system, in which data from prior clinical experience provides an ever-expanding resource to guide continuous improvements in health care. Although still in its early stages, the use of data from clinical experience to supplement data from premarket testing is changing the roles of Food and Drug Administration (FDA) and public and private health insurers in healthcare innovation and technology assessment. It could change who decides what research questions to pursue, whose evidentiary standards decide what counts as actionable knowledge, and who pays the costs of research. The shape and direction of resulting changes will depend on which actors and institutions decide to step forward and claim a larger role in healthcare innovation in response to technological and regulatory change.

We analyse the role of culture in economic freedom reform and dispersion in an unbalanced panel of up to 80 countries, and in dyadic models with up to 3,003 unique country pairs. We find that a sense of individualism strengthens the effectiveness of democracy in promoting economic freedom within countries over 1950–2015, and that institutional distance between countries increases in their cultural distance, suggesting an important role of culture in determining long-run institutional equilibria. Our results are robust to a large variety of socio-economic controls, measures of institutions and measures of bilateral geographic, economic and demographic distances.

This article draws on several of the major breakthroughs in the institutions and development field to demonstrate that criticisms of work in this field as a whole based on its allegedly universal and unquestioning support for liberalizing institutions and the simplistic rationale and deficient empirical methods that have been used to buttress that support are outdated, inappropriate and misleading.

In-transit cold treatment consists of exposing food commodities – generally fresh agricultural products – to temperatures approaching 0 °C for a variable number of days during shipping in purpose-equipped containers in order to manage the risks of quarantine contamination. In this paper, we show that in-transit cold treatment is frequently required in the international trade of apples potentially affected by Mediterranean fruit fly (Ceratitis Capitata), despite the existence of potentially less costly and equally effective alternative means of applying the same treatment, in particular ‘cold storage’. We then try to understand why these alternative methods do not emerge spontaneously or become more widespread. We suggest that technical aspects and their respective costs are not always the most important factors. Transaction costs may also come into play. In accordance with ‘institutional path dependence’ literature, we suggest that the negotiation costs a country has to bear in order to encourage its trading partners to adopt an alternative treatment are high enough for it to be preferable to continue using the current solution, despite its higher adoption cost.

Despite its relatively small size, Belgium has historically been considered to have the most diverse array of beer varieties in the world. We explore whether Belgium's institutional history has contributed to its beer diversity. The Belgian area has experienced a heterogeneous and variable array of institutional regimes over the last millennia. In many cases institutional borders crossed through the Belgian area. We trace the historical development of many of Belgium's well-known beer varieties to specific institutional causes. We also show that the geographic production of important varieties, such as Old Brown, Red Brown, Trappist, Lambic, Saison, and Gruitbeer, continues to be influenced by Belgium's institutional past.

In this article, we reconceptualize, using an extended discrete and dynamic Ostrom's classification, the specific intellectual property (IP) regimes that support geographical indications (GIs) as ‘knowledge commons’, e.g. a set of shared collective knowledge resources constituting a complex ecosystem created and shared by a group of people that has remained subject to social dilemma. Geographical names are usually considered part of the public domain. However, under certain circumstances, geographical names have also been appropriated through trademark registration. Our analysis suggests that IP laws that support GIs first emerged in Europe and spread worldwide as a response to the threat of undue usurpation or private confiscation through trademark registration. We thus emphasize the nature of the tradeoffs faced when shifting GIs from the public domain to shared common property regimes, as defined by the EU legislation pertaining to GIs. In the context of trade globalization, we also compare the pros and cons of regulating GIs ex-ante rather than engaging in ex-post trademark litigation in the courts.

By analyzing the population growth at the top of the urban hierarchy, we test two hypotheses explaining the rise of mega-cities: trade and political institutions. We find that democratic institutions are the main factor behind the concentration of a nation's urban population in the main city. Contrary to the literature, we find that extractive institutions reduce the size of the biggest city.

The administration of the forensic science process falls into the hands of supervisors, local administrators, and prosecution attorneys and police agencies. In the current structure, the police and prosecution are the principal and the forensic scientists the agent. I identify changes that must be made in that relationship to eliminate biases and to determine the major obstacles that stand in the way of creating the necessary changes. I focus on the ‘middle managers’ – the supervisors and laboratory directors – as the cultural key masters. I recommend: mechanism design principles to enable laboratories to report to a board of directors, rather than the prosecutor and police; for the development of compensation plans for middle managers to build a culture of learning based on error tolerance rather than error punishment; and for the use of intrinsic and extrinsic motivations to facilitate the identity changes of cultural key masters.

Judge Posner (2010) offers a substantial agenda for organization economics. He advises us on how organization economics can shed substantial light on some of the most pressing social problems of the day. I comment on two of the areas he selects for discussion and offer some comments on the relationship of organization economics to new institutional economics. Judge Posner surely is right to argue that organization economics can help us understand the failures of corporate governance in regulating executive pay. Moreover, with additional and more institutionally nuanced theorizing, organizational economics should further our understanding of the work of judiciaries in the civilian and common law traditions. Judge Posner tells us that organization economics and new institutional economics are related fields. I make a plea for economic holism. Organizations are institutions. While getting clear on disciplinary boundaries and the differing kinds and concepts of institutions is important, logical differences in concepts like ‘organization’ and ‘institution’ may be less important than what to emphasize in theory construction and what to test for with those theories. The success of organization economics will be in whether the different emphases produce new insights. Judge Posner is right to tell us that new insights are coming and will continue to come from organization economics. This is true however we conceptualize the field as a school of thought.

Professor Hodgson in his review of my A Culture of Growth (Princeton University Press, 2016) raises a number of important issues. One of them is the usefulness of the concept of a ‘market for ideas’ as an analytical tool in discussing the way cultural change affects economic change. Even though there is no price mechanism that clears the market, many basic components of the economic analysis of markets carry through and enriched by evolutionary concepts. A second question is the importance of cultural entrepreneurs, who play an important role in my book. It should be stressed that such ‘Vital Few’ were rarely indispensable, yet their influence on subsequent events may have imparted a direction on events and accelerated them. In any event, the success of such entrepreneurs was an indication of an intellectual environment sufficiently open to new ideas to be consistent with major new ideas such as the possibility and desirability of sustained economic progress.

The discussion about the role of institutions in economic development should revolve around the relative performance of institutions and not around the alleged superiority of one system over the other.