When I was an undergraduate in Oxford, we were taught economics almost as though it were a natural science. The subject matter of economics might be different from physics, but only in the way that the subject matter of chemistry or biology is different from physics. The actual results were presented to us as if they were scientific theories. So, when we learned that savings equals investment, it was taught in the same tone of voice as one teaches that force equals mass times acceleration. And we learned that rational entrepreneurs sell where marginal cost equals marginal revenue in the way that we once learned that bodies attract in a way that is directly proportional to the product of their mass and inversely proportional to the square of the distance between them. At no point was it ever suggested that the reality described by economic theory was dependent on human beliefs and other attitudes in a way that was totally unlike the reality described by physics or chemistry.

Blockchains are a new digital technology that combines peer-to-peer network computing and cryptography to create an immutable decentralised public ledger. Where the ledger records money, a blockchain is a cryptocurrency, such as Bitcoin; but ledger entries can record any data structure, including property titles, identity and certification, contracts, and so on. We argue that the economics of blockchains extend beyond analysis of a new general purpose technology and its disruptive Schumpeterian consequences to the broader idea that blockchains are an institutional technology. We consider several examples of blockchain-based economic coordination and governance. We claim that blockchains are an instance of institutional evolution.

The article tries to advance our understanding of institutional economics by critically examining the currently dominant discourse on institutions and economic development. First, I argue that the discourse suffers from a number of theoretical problems – its neglect of the causality running from development to institutions, its inability to see the impossibility of a free market, and its belief that the freest market and the strongest protection of private property rights are best for economic development. Second, I point out that the supposed evidence showing the superiority of ‘liberalized’ institutions relies too much on cross-section econometric studies, which suffer from defective concepts, flawed measurements and heterogeneous samples. Finally, I argue that the currently dominant discourse on institutions and development has a poor understanding of changes in institutions themselves, which often makes it take unduly optimistic or pessimistic positions about the feasibility of institutional reform.

This paper proposes an analytical-cum-conceptual framework for understanding the nature of institutions as well as their changes. First, it proposes a new definition of institution based on the notion of common knowledge regarding self-sustaining features of social interactions with a hope to integrate various disciplinary approaches to institutions and their changes. Second, it specifies some generic mechanisms of institutional coherence and change – overlapping social embeddedness, Schumpeterian innovation in bundling games, and dynamic institutional complementarities – useful for understanding the dynamic interactions of economic, political, social, organizational, and cognitive factors.

This article compares a variety of theoretical approaches to conceptualizing institutional change. Our goal is neither to discover the ‘best’ theory, nor to attempt to build a new one. Rather, we wish to compare how the theories we consider agree or differ with respect to the causes, process, and outcomes of institutional change. Some of the theories we discuss emphasize the deliberate creation of institutions through the political process, while others emphasize the spontaneous emergence of institutions through evolutionary processes. Still others combine elements of evolution and design. We differentiate a variety of approaches to conceptualizing the interaction between formal and informal rules. We discuss recent theories based on the ‘Equilibrium View’ of institutions, and theories emphasizing the role of habit, learning, and bounded rationality. We also consider theoretical explanations for institutional inertia and path-dependence.

Existing theories of organizational routines have generally had simplistic and extreme views of artifacts as fully deterministic or largely inconsequential. Artifacts have been treated as either too solid to be avoided, or too flexible to have an effect. This paper endeavours to improve our understanding of the influence of artifacts on routines dynamics by proposing a novel and deeper conceptualization of their mutual relationship. In drawing from recent advances in Routines and STS/Performativity Theory, the paper contributes to advancing our understanding of routines dynamics by bringing artifacts and materiality from the periphery to the very centre of routines and Routines Theory.

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.

Most powerful analytical tools used in the social sciences are well suited for studying static situations. Static and mechanistic analysis, however, is not adequate to understand the changing world in which we live. In order to adequately address the most pressing social and environmental challenges looming ahead, we need to develop analytical tools for analyzing dynamic situations – particularly institutional change. In this paper, we develop an analytical tool to study institutional change, more specifically, the evolution of rules and norms. We believe that in order for such an analytical tool to be useful to develop a general theory of institutional change, it needs to enable the analyst to concisely record the processes of change in multiple specific settings so that lessons from such settings can eventually be integrated into a more general predictive theory of change.

This paper investigates whether since the 1980s neoclassical economics has been in the process of being supplanted as the dominant research programme in economics by a collection of competing research approaches which share relatively little in common with each other or with neoclassical economics. A shortlist of the new approaches in recent economics includes game theory, experimental economics, behavioral economics, evolutionary economics, neuroeconomics, and non-linear complexity theory. Two hypotheses are advanced – one regarding the relation between economics instruction and economics research and one regarding the nature of the economics research frontier – to describe social-institutional practices that contribute to the replication of economics as a field. Two further hypotheses are advanced – one regarding the boundaries of the field and one regarding how the field appraises itself – to create a historical–methodological framework for evaluating the question of change in economics and change in recent economics in particular. Finally, the paper distinguishes three leading explanations – the ‘breakdown’ view, the ‘takeover’ view, and the ‘maturity’ view – of why neoclassical economics no longer dominates a mainstream economics.

This paper develops an organizational economics explanation for agricultural cooperatives by building upon the transaction cost theory of family farms. According to this theory, the importance of family farms in Western agriculture is a result of the low feasibility of hierarchical organization in agricultural production due to supervision and monitoring difficulties. This paper argues that the transaction cost-economizing effect of family farms has a price in the form of their limited ability to realize economies of scale and to develop market power comparable to that of their up- and downstream trading partners. The role of agricultural cooperatives is shown to help overcome these limitations in order to take advantage of the transaction-cost economizing properties of family farms. This explanation of agricultural cooperatives is sector-specific in the sense that it traces the benefits of cooperative organization back to the organizational attributes of agricultural production.

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.

Previous research, notably Baumol (1990), has highlighted the role of institutions in channeling entrepreneurial supply into productive, unproductive, or destructive activities. However, entrepreneurship is not only influenced by institutions – entrepreneurs often help shape institutions themselves. The bilateral causal relation between entrepreneurs and institutions is examined in this paper. Entrepreneurs affect institutions in at least three ways. Entrepreneurship abiding by existing institutions is occasionally disruptive enough to challenge the foundations of prevailing institutions. Entrepreneurs sometimes have the opportunity to evade institutions, which tends to undermine the effectiveness of the institutions, or cause institutions to change for the better. Lastly, entrepreneurs can directly alter institutions through innovative political entrepreneurship. Like business entrepreneurship, innovative political activity may be productive or unproductive, depending on the incentives facing entrepreneurs.

Entrepreurship theory within economics has long touted the importance of judgment in entrepreneurial action. More recently, proponents have begun to advocate extension of this work to organization studies. However, critics of entrepreneurial judgment have responded by claiming that the construct is only meaningful post hoc and vapid when examined ex ante. Instead, they claim that, if entrepreneurship theory is to progress, then judgment must be replaced by a process logic known as effectuation. This article examines their claims and redefines the judgment dilemma as one of scope rather than existence. Empathic accuracy is then introduced to offer a means of addressing their criticism without having to deny the existence of entrepreneurial judgment. Empathic accuracy is also shown to be capable of explaining some of the cognitive mechanisms necessary for effectuation and dynamic socio-economic order.

In this paper, we emphasize the role of institutions as the underlying basis for economic and social activity. We describe and compare different institutional classification systems, which is rarely done in the literature, and show how to empirically operationalize institutional concepts. More than 30 established institutional indicators can be clustered into three homogeneous groups of formal institutions: legal, political and economic, which capture to a large extent the complete formal institutional environment of a country. We compute the latent quality of legal, political and economic institutions for every country in the world and for every year. On this basis, we propose a legal, political and economic World Institutional Quality Ranking, through which we can follow whether a country is improving or worsening its relative institutional environment. The calculated latent institutional quality measures can be especially useful in further panel data applications and add to the usual practice of using simply one or another index of institutional quality to capture the institutional environment. We make the Institutional Quality Dataset, covering up to 197 countries and territories from 1990 to 2010, freely available online.

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.

In this paper I identify fractionalization as a consequence rather than solely a cause of poor institutions. I investigate how heterogeneous agents in precolonial Africa relied on social distance-reducing signals to make trade with one another possible. I then show how colonial institutions created noise in these signals, inhibiting widespread cooperation. By stifling trade between diverse agents, colonial institutions contributed to Africa's poor economic growth.

The paper approaches the ‘market versus state’ issue from the perspective of constitutional political economy, a research program that has been advanced as a principal alternative to traditional welfare economics and its perspective on the relation between market and state. Constitutional political economy looks at market and state as different kinds of social arenas in which people may realize mutual gains from voluntary exchange and cooperation. The working properties of these arenas depend on their respective constitutions, i.e. the rules of the game that define the constraints under which individuals are allowed, in either arena, to pursue their interests. It is argued that ‘improving’ markets means to adopt and to maintain an economic constitution that enhances consumer sovereignty, and that ‘improvement’ in the political arena means to adopt and to maintain constitutional rules that enhance citizen sovereignty.

The analysis of the main features of knowledge, in terms of domain, characteristics and processes makes it possible to trace significant shifts in the economics of knowledge. Changing emphasis about the role of knowledge appropriability, divisibility and tradability has provided different solutions to the knowledge trade-off. Three different and rival concepts of technological knowledge can be identified: (a) knowledge as a public good, (b) knowledge as a proprietary good, (c) knowledge as a localized, collective and complex, path dependent activity. Such a shift has relevant implications in terms of governance mechanisms, strategic attitude of agents and public policy making.

The concept of institutional complementarity plays an important role in the comparative analysis of capitalism. It has often been criticised for being too static and too functionalist, unable to explain change because it would propose a view of institutional forms fitting perfectly with one another. After having presented the concept and its interest for comparative capitalism, this article argues in favour of its usefulness to explain institutional change. However, in order to be integrated fruitfully into a theory of institutional change, it is necessary to have a political economy definition of complementarity, which should not take institutions as some sort of inputs in a production function, but as socio-political compromises established in historically-specific conditions.

In this paper we discuss the origins and emergence of organizational routines and capabilities. We first argue that there are theoretical and endogeneity-related concerns associated with the key antecedents and mechanisms specified by the extant routines and capabilities literature. Specifically, we explicate the behaviorist and empiricist foundations of the organizational routines and capabilities literature and the extant emphasis placed on experience, repetition, and observation as the key antecedents and mechanisms of routines and capabilities. Based on this discussion we highlight several, endogeneity-related concerns, namely: (1) the problem of origins and causation, (2) the problem of extremes, (3) the problem of intentionality, (4) the problem of new knowledge, and (5) the problem of the environment. We introduce the ‘poverty of stimulus’ argument and discuss how an internalist or rationalist, choice-based approach can provide a more fruitful (though preliminary) foundation for understanding organizational behavior and capabilities.