Legal theorists and other commentators have long established a distinction between property and possession. According to this usage adopted here, possession refers to control of a resource, but property involves legally sanctioned rights. Strikingly, prominent foundational accounts of the ‘economics of property rights’ concentrate on possession, downplaying the issue of legitimate legal rights (Alchian, 1965, 1977; Barzel, 1994, 1997, 2002; von Mises, 1981). Some authors in this genre make a distinction between ‘economic rights’ and ‘legal rights’ where the former are more to do with possession or the capacity to control. They argue that ‘economic rights’ are primary and more relevant for understanding behaviour. But it is argued here that legal factors – involving recognition of authority and perceived justice or morality – have also to be brought into the picture to understand human motivation in modern societies, even in the economic sphere. As other authors including Hernando De Soto (2000) have pointed out, the neglect of the legal infrastructure that buttresses property has deleterious implications, including a failure to understand the role of property in supporting collateralized loans for innovation and economic development.

We propose a new framework to unify three conceptions of institutions that play a prominent role in the philosophical and scientific literature: the equilibria account, the regulative rules account, and the constitutive rules account. We argue that equilibrium-based and rule-based accounts are individually inadequate, but that jointly they provide a satisfactory conception of institutions as rules-in-equilibrium. In the second part of the paper we show that constitutive rules can be derived from regulative rules via the introduction of theoretical terms. We argue that the constitutive rules theory is reducible to the rules-in equilibrium theory, and that it accounts for the way in which we assign names to social institutions.

This is an introduction to the twelve essays in the special memorial issue in honor of Ronald Coase. It includes a brief account of Coase's long life and some of its many achievements. Coase's distinctive, worldly and empirically-grounded approach to economics is highlighted, claiming that it has yielded major theoretical and policy insights. This introduction concludes with a summary of the contributions of the twelve essays.

Drawing on current biology, we argue that the phase space of economic evolution is not stable. Thus, there are no entailing laws of economic dynamics. In this sense, economic dynamics are creative and the economy is not a causal system. Because economic dynamics are creative, the implicit frame of analysis for the econosphere changes in unprestatable and non-algorithmic ways. New-venture, social, and political entrepreneurs solve the frame problem of the econosphere. Economic evolution is unpredictable, not entailed, and the number of things traded (‘cambiodiversity’) increases over time. Our metatheoretic framework points out how institutions, entrepreneurs, and disparate actors enable what we call ‘novelty intermediation’. We provide examples of novelty intermediation from Rennaissance Italy to Silicon Valley. Our framework does not automatically provide clear policy prescriptions in part because our main result is negative. It may nevertheless provide a useful prolegomenon to a future economics fit for a creative world.

This essay outlines the contributions of Ronald Harry Coase (1910–2013) to institutional economics, noting his insistence on the importance of studying real world institutions and his personal contribution as an institution builder.

Critics of mainstream economics often argue that the mainstream does not recognize that the economy is dynamic, creative and evolving, and they base their criticism of it for its failure to recognize that. This paper argues that the mainstream does recognize that the economy is evolving, and changes its methods as new analytic technologies and computational methods develop. The paper suggests that a narrower critique of the mainstream is appropriate: It attempts to be too scientific, following a scientific rather than an engineering methodology. Thinking of applied economic policy as engineering, not science opens up new avenues of research, and will allow it be better deal with our complex world.

Geoffrey Hodgson has a number of criticisms regarding the ‘economic approach to property rights’ that has been mostly championed by members of the UCLA and Washington departments of economics during the 1960s–1990s. In this short note I address these comments and point out that most are simply a matter of nomenclature. When there are disagreements they stem from Hodgson’s failure to account for positive transaction costs and this literature’s emphasis on operational explanations of organization.

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.

In this comment I discuss the excellent contribution of Koppl et al. (2014) to our understanding of the role of institutions in the economic system. Much that is offered by them reinforces and extends previous analysis by institutional and evolutionary economists. However, I argue that there are areas of evolutionary economics and complex economic system analysis that need to be integrated into their evolutionary economic perspective to make it more complete. Also, I argue that they are too kind to mainstream economists who purport to deal with institutions and complexity and that they should consider where the boundaries of science should lie in economics.

This comment divides ‘property rights’ into ‘legal rights’ and ‘economic rights’ in order to distinguish between two very different concepts that are often confounded in the literature. Because of transaction costs, neither kind of rights is ever complete. These are useful in economic analysis as maximizing individuals constantly expand and shrink them. Unlike Hodgson’s, both notions of rights adopted here are positive, useful in analyzing behavior, and not normative as Hodgson (2015) claims them to be. As used by me, they do not devalue property rights as Hodgson claims.

This short commentary basically supports the unified approach to institutions of Hindriks and Guala (2014). First, using a flow diagram over the two-by-two boxes in the space spanned by the collective-individual dimension and the behavior (play)-cognitive (belief) dimension, it argues that the classical game theory and the so-called institution-as-rule theory are both incomplete and that they should be regarded as complementary for an integrated theory of institution as a process. However, the substantive forms of institutions ought to be linguistic representations (i.e. rules and ideas) that summarize equilibrium states of play of the societal game so as to mediate them to be incorporated into minds of players as collective intentionality (i.e. shared beliefs). From this perspective this note also supports the authors’ argument to unpack the ‘Y’ term in Searle's notion of constitutive rule (that is, the regulative rule) and submit it to be based on a neo-Hegelian notion of mutual recognition (i.e. equilibrium).

Ronald Coase had a profound impact on scholarship worldwide, and not for his ideas alone. Coase's ideas about transaction costs, the nature of the firm, the role of government, and the problem of social cost have been hugely influential. Throughout his long life, he also worked to change the conduct of economics, urging economists to ground their conclusions in careful study of empirical reality rather than theories that work only on the blackboard. Less well known, perhaps, is his work to nurture and shape the emerging fields of law and economics and new institutional economics, or his support to young scholars studying institutional issues around the world. In his final years, he was preoccupied by the rapid transformation of China and the institutional structure of production. This article summarizes Coase's significant intellectual contributions to economics, pointing out along the way some of the traits that made him such a powerful thinker and exceptionally influential scholar.

This note comments on Hindriks and Guala's ‘unified theory of institutions’. One of the components that Hindriks and Guala seek to unify, and which they claim is unsatisfactory on its own, is the analysis of conventions that derives from the work of Lewis. I argue that the Lewisian approach provides simple and powerful explanations of many regularities in the social behaviour of humans and other animals. Those explanations can be seen as good social science even if, as Hindriks and Guala argue, they do not fit with common-sense ontology.

Hodgson's (2015) critique of extra-legal ‘property rights’ – in this case, so-called ‘economic property rights’ – is right on target. This Comment contributes two further points to his critique. First, the notion of ‘economic property rights’ is based on what Gilbert Ryle (1949) referred to as a ‘category mistake’, conflating physical possession, which is a brute fact about the world, with the right or entitlement to possession, which is a social or institutional fact that cannot exist in the absence of some social contract, convention, covenant, or agreement. The very notion of a non-institutional ‘right’ is oxymoronic. Second, the fact that property is an institutional fact does not mean it must exist with the structure of a ‘state’ (as Bentham suggested). Rather, institutions like ‘property rights’ only require some community, however large or small, operating with what Searle (1995; 2005) calls collective intentionality and collective acceptance, according to shared ‘rules of recognition’ (Hart, 1997).

These notes on the article by Koppl et al. (2014) contain some agreements and some criticism. Written upon the invitation of the editor-in-chief of this journal, they express personal views of an economist who has been searching in a similar direction – that is, for a better economic theory, more relevant to problems of modern, innovative, and thus possibly called ‘creative’ economies than the existing theories – but in a somewhat different, less abstract, and to standard economic terminology closer style. The strongest agreements are with both parts of the article's objective: to move away from mechanistic economic models and toward a more evolutionary and institutional approach to economic theory and policy. The pursuit of the first part is most seriously criticized for two illegitimate extensions of initially sound arguments, and the pursuit of the second part, for climbing up to a too abstract metatheoretic level, from which it loses the view of the concrete results that modern economics has already obtained.

Ronald Coase's work and its reception illustrate the significance – and the difficulty – of identifying problems and proposing solutions, which provides the theme of this paper. His theoretical innovation was not derived from economics, and seemed irrelevant to contemporary issues of economic theory and policy; only his much later perception of an apparently unrelated problem – the incoherent treatment of social cost as market failure – showed how the concept of transaction costs could illuminate two major areas of economics. The inadequate treatment by economists of the transaction costs of markets is linked to the neglect of processes, and especially the processes of organising the growth and use of knowledge – key concerns of Smith and Marshall. The curious relationship between Coase's explanation of firms and Austin Robinson's analysis of competitive industry leads to a reflection on the scarce resource of human cognition and the role (and fallibility) of institutions.

With its ability to incessantly create new actions and innovations the economy presents itself as an open, evolving (self-transforming) system. In their ‘economics for a creative world’ Koppl et al. (2014) try to account for the features of that system and discuss methodological consequences for its analysis. Claiming that ‘ . . . novelty and innovation are uncaused’ and that ‘ . . . no laws entail the evolution of the econosphere’ they hold that fundamental scientific principles do not apply. In the present comment it will be argued that both claims are difficult to defend. Causality and law-like hypotheses also apply to novelty and innovation.

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.

One of the main contributions of Ronald H. Coase was to demonstrate how mainstream economics was based on a contradictory amalgam of costly physical inputs and free institutional resources, and to give origin to the economics of institutions: each institution is a mode of allocation and organization of economic resources that is to be investigated. In particular, none of the institutions (including the market) is a free lunch. The Coasian approach regards institutions as costly substitutes and provides a fundamental starting point for comparative institutional analysis. However, Coase neglected two issues deriving from the observation that institutions are not cost-free. First, when institutions are costly, one should not only consider their possible substitutes but also how complementary institutions affect their costs, as well as the costs of the possible institutional substitutes. Second, the economic analysis should also take into account that the transition from one institutional setup to another cannot occur in costless meta-institutions. The initial conditions may substantially affect the final institutional arrangements. Both the novelty of Coase's approach and its limits were grossly undervalued. In particular, the costly institutions assumption requires a view of economics as a historical discipline.

This is a response to the useful comments by Allen, Barzel and Cole on Hodgson (2015a) on property rights. One section deals with some misrepresentations by Allen and Barzel. For instance, contrary to one interpretation, Hodgson (2015a) did not accuse the ‘economics of property rights’ of ignoring legal institutions or of making them generally irrelevant. This response further clarifies the standard meaning of rights, showing that it is at variance with usages in the ‘economics of property rights’. The issue of moral motivation, and its relevance for legal compliance, are also elaborated. Some arguments in Hodgson (2015a) have been described by critics as mere semantics, but in response it is argued – contrary to philosophical nominalism – that changes in the meanings of words can be analytically significant, and we should treat traditional meanings more seriously, especially when dealing with other disciplines such as law. (The cryptic reference to Humpty Dumpty comes in here). Before concluding, there is also a brief discussion of different ways of interpreting transaction costs.