Behavioral (e.g., consumption) patterns of boundedly rational agents can lead these agents into learning dynamics that appear to be ‘wasteful’ in terms of well-being or welfare. Within settings displaying preference endogeneity, it is however still unclear how to conceptualize well-being. This paper contributes to the discussion by suggesting a formal model of preference learning that can inform the construction of non-standard notions of dynamic well-being. Based on the assumption that interacting agents are subject to two biases that make them systematically prefer some cultural variants over others, we develop a procedural notion of well-being, based on the idea that policy should modify institutional conditions that generate dynamic instability in preference trajectories, while leaving individual choice sets unrestricted.

The organization of information production is undergoing a deep transformation. Alongside corporations, which have been for long time the predominant institutions of information production, new organizational forms have emerged, e.g. free software communities, open-content on-line wikis, and collective blogs. The paper investigates the factors that favoured the emergence of these alternative systems, called peer production. Different from the previous literature, the paper considers technology as an endogenous variable in the process of organizational design. On this basis, the paper argues that the diffusion of digital technology is a necessary but not sufficient condition to explain the emergence of peer production. A similarly important role has been played by the set of ethics that motivated the early adherents to the free software movement. Such an ethics indeed operated as a ‘cultural subsidy’ that helped to overcome the complementarities existing among distinct institutional domains, and let a new organizational species to emerge.

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.

The statement ‘institutions matter’ has become commonplace. A precondition for it to be supported by empirical evidence is, however, that institutions are measurable. Some of the difficulties in measuring institutions are described and some ways of measuring them are proposed.

Investigations of a society's competitiveness aim to trace the causal mechanisms behind patterns in wealth and poverty across societies. This paper argues that to be productive such investigations must be comparative, historical, and political economic in nature. Comparative historical political economy is how social scientists generate useful knowledge about the wealth and poverty of nations. Our contribution is a methodology – or rather a collection of methodologies – for understanding national competitiveness and attempts to improve it: one focuses on political-economic analysis, another on historical analysis, and a third on comparative analysis.

Social and cultural determinants of economic institutions and outcomes have come to the forefront of economic research. We introduce religiosity, measured as the share for which religion is important in daily life, to explain institutional quality in the form of property rights and the rule of law. Previous studies have only measured the impact of membership shares of different religions, with mixed results. We find, in a cross-country regression analysis comprising up to 112 countries, that religiosity is negatively related to our institutional outcome variables. This only holds in democracies (not autocracies), which suggests that religiosity affects the way institutions work through the political process. Individual religions are not related to our measures of institutional quality.

This article is a tribute to Elinor Ostrom. It explores two enduring lessons she taught: a substantive lesson that involves embracing complexity and context, and a methodological lesson that involves embracing a framework-driven approach to systematic, evolutionary learning through various interdisciplinary methodologies, theories, and empirical approaches. First, I discuss Ostrom's work on environmental commons. I illustrate the two lessons through a discussion of the tragedy of the commons. Next, I explain how the two lessons play a significant role in recent efforts to extend Ostrom's work on environmental commons to knowledge/cultural commons. I draw a parallel between the tragedy of the commons allegory and the free-rider allegory, and show how many of the problems Ostrom explored in the environmental context are manifest in the cultural environmental context. I discuss an ongoing research project that follows the path that Ostrom blazed and systematically studies commons in the cultural environment.

I use the historical institutions of the Trobriand Islands to discuss problems and non-problems with measuring institutions and estimating their causal effects on economic outcomes.

More than 40 years ago, Elinor Ostrom began her adventures with the police. In order to combat the conventional view that ‘bigger means better’, Ostrom pioneered a fieldwork-based framework for measuring police services that utilized consumer surveys and thereby created a community-centered model of analysis for public services. In this paper, we contend that although Ostrom's career demonstrated the importance of employing multiple methods, her most enduring contributions and legacy came from on-the-ground research. Her case studies and fieldwork proved to be necessary for examining complex systems beyond the state–market dichotomy, and these methods of analysis should be defended as critical for inquiry into the variety of institutional arrangements.

In his article on measuring institutions, Stephan Voigt (2012) proposes a pragmatic approach to develop more concrete, objective institutional variables than the broad abstractions used in most cross-country growth regressions. Voigt's approach has important strengths, but cross-country growth regressions, even with precisely measured institutions, are less likely to yield new insights than other methodologies.

We undertake a close textual study of the entire corpus of Ludwig Lachmann's publications from 1936 to 1991 and demonstrate that his theory of entrepreneurial behaviour is sufficiently distinctive to warrant ranking alongside the theories of Schumpeter and Kirzner. Lachmann's entrepreneurs are creatively constructive change-agents who discover, exploit and create gaps in capital structures. Entrepreneurs select and interpret specific market and institutional phenomena using pre-existent rules and mental ‘instruments’, extract meaning about capital-forming opportunities, and generate all subsequent capital combinations. Lachmannian entrepreneurs are problem-solvers and communicate problem ‘solutions’ by dissolving and reforming capital combinations. We examine 20th-century Lachmannian research that builds on these foundations – research that emphasizes the institutional and material embeddedness of entrepreneurial behaviour and that appreciates the capacity of Lachmann's approach to explain entrepreneurial success, imitation and failure in a dynamic endogenous process. To underscore the distinctiveness of the Lachmannian entrepreneur, we compare it with Schumpeterian and Kirznerian approaches.

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 political elite require resources in order to survive politically. Given the conditions existing in most developing nations, this implies following an inward-oriented development strategy promoting a large-scale, capital-intensive industrial sector. This strategy impoverishes agriculture and implies that the leaders of the industrial sector will make up a critical component of the coalition providing political support to the political elite. Reform allowing for outward-oriented growth will be extremely difficult. Dramatically increasing agricultural productivity provides a means to provide political legitimacy for the ruling elite as well as the political leverage to bring about reform.

This is a short reply to the comments by James Robinson and Mary Shirley on my paper ‘How (not) to measure institutions’.

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.

Elinor Ostrom was a leader in using multiple methods to perform institutional analysis. In this paper, we discuss how a multi-method approach she pioneered may be used to study the robustness of social–ecological systems. We synthesize lessons learned from a series of studies on small-scale irrigation systems in which we use case-study analysis, experimental methods in laboratory and field settings, and mathematical models. The accumulated insights show the importance of creating institutional arrangements that fit the human ecology within the biophysical constraints of the system. The examples of work based on multiple methods approaches presented here highlight several lessons. For example, experimental work helps us better understand the details of how the ability to maintain trust relationships, low levels of inequality, and low transaction costs of coordination are critical for success. Likewise, the integration of case-study analysis and modeling helps us better understand how systems that can leverage biophysical characteristics to help address challenges of monitoring, sanctioning, and coordination may be able to increase their chances of success.

The legal realist Robert Lee Hale offered a definition of freedom as a zero-sum game: each volitional freedom implies some degree of coercion over other people's freedom, and at the same time one's freedom is subject to some degree of control and coercion by others. The objective of our work is to develop this idea along with the theory of positional goods. This allows us to illustrate the externalities deriving from the ‘consumption’ of freedom and detail the role of the lawmaker in accordance with the Halean contribution.

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.

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 situates Elinor Ostrom's work on common-pool resource management in the tradition of ‘robust political economy’. Ostrom's analysis of bottom-up governance institutions is shown to recognise that such arrangements though imperfect are better placed to cope with bounded rationality and incentive compatibility problems in the management of smaller- and medium-scale common-pool resources. While Ostrom's work provides an analytical framework to explain the success of these arrangements, however, the paper argues that it lacks a robust account of when, if ever, top-down governance arrangements are to be preferred.