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Linking institutions to economic performance: the role of macro-structures in micro-explanations

Published online by Cambridge University Press:  12 April 2012

CYRIL HÉDOIN
CYRIL HÉDOIN*
Affiliation:
Department of Economics, University of Reims Champagne-Ardenne, 57B Rue Pierre Taittinger, 51100 Reims, France
*
*Email: [email protected]
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Abstract:

Economists have been investigating the link between institutions and economic performance for several years. While econometric studies of this link have flourished, they are of limited use in understanding the causal mechanisms making some institutions responsible for economic performance. Several works using game theory and akin to the ‘new institutional economics’ have entertained the goal of developing micro-explanations of the institutions–performance link. Because game theory focuses on individuals’ actions and beliefs, game-theoretic studies of institutions are thought to oppose more ‘structuralist’ explanations that downplay the role of individual agents and put more emphasis on the importance of social (or ‘macro’) structures. This paper demonstrates that this claim is misconceived, as the micro-explanations produced by game-theoretic models must assume already existing macro-structures. Institutions produce downward effects, shaping each agent's action. Moreover, in a game-theoretic framework, macro-structures are constitutive of individual agency since, without them, agents would often be unable to choose. I illustrate this claim with the example of Avner Greif's study of the role of cultural beliefs in the economic organisation of medieval societies.

Type
Research Article
Information
Journal of Institutional Economics , Volume 8 , Issue 3 , September 2012 , pp. 327 - 349
Copyright
Copyright © Millennium Economics Ltd 2012

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Footnotes

This article was presented at the ‘Performance and Institutions’ conference, held in Reims, France, on 17 and 18 November 2011. I thank Geoffrey Hodgson for his comments on the previous version of this article. I also thank the two anonymous referees for their valuable remarks which have help to improve the overall quality of the paper. Finally, I am grateful to Sophie Delabruyère for her help to improve the quality of the English. All remaining errors and omissions are mine.

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