This article investigates farm investment behaviour and the presence of soft budget constraints in the agricultural sectors of three Central and Eastern European countries – Estonia, Hungary and Slovenia – using individual farm accountancy panel data for the 2007–2015 period. Gross farm investment is positively associated with gross farm investment for the previous year, growth in real sales and public investment subsidies. Mixed results for debt square and cash flow variables imply that the different investment behaviour of farms pertains to different structures of investment sources among the countries under analysis. A particularly significant negative cash flow coefficient implies strong soft budget constraints for Estonian farms, while insignificant cash flow coefficients imply weak soft budget constraints for Hungarian and Slovenian farms.

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.

This paper addresses a specific institution, the Protected Designation of Origin (PDO) in wine markets. To understand the present strategic choices in the context of the globalization of wine markets, the paper seeks to explain the economic logic of this specific institution, its genesis and its evolution. Using an evolutionary games approach, we build an evolutionary model of the strategic determination of quality. Four configurations emerge. The PDO can be related to signals and policies of quality in strategic situations. This study also yields general results for use in the evolutionary analysis of other institutions.

This paper analyzes the determinants of network structure, as measured by hierarchy and monopolization, by examining various black market networks. We examine structures of networks on the Internet Dark Net (Virtual) and compare it to network structures of traditional black markets (Ground), using agent-based modeling. The purpose of modeling these two different types of illicit markets is to understand the network structure that emerges from the interactions of the agents in each environment. Traditional black markets are relatively hierarchical, with high degree and high betweenness. We compare the density and average length of the shortest path of the simulated Ground black market networks with our simulated Virtual network. We find that hierarchy and monopolization tendencies in networks are products of different transaction costs and information asymmetries. The Internet is an effective way to lower multiple aspects of network structure. We observe that the network structure surrounding the interactions in the Virtual black market is less hierarchical and slightly more monopolistic than the network structure of the Ground market.

Health systems provide a rich field for testing hypotheses of institutional economics. The incentive structure of current healthcare delivery systems have deep historical and cultural roots, yet must cope with rapid technological change as well as market and government failures. This paper applies the economic approach of comparative and historical institutional analysis (Aoki, 2001; Greif, 2006) to health care systems by conceptualizing physician control over dispensing revenues as a social institution. The theory developed – emphasizing the interplay between cultural beliefs, interest groups, technological change, insurance expansion and government financing – offers a plausible explanation of reforms since the 1960s separating prescribing from dispensing in societies such as Japan, South Korea, Taiwan and China. Technological change and adoption of universal coverage trigger reforms by greatly increasing the social opportunity costs of physician over-prescribing and reshaping the political economy of forces impinging on the doctor–patient relationship.

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.

The paper builds an integrative framework of the moral dimensions of the employment relationship by linking the core specificities of the employment relationship, i.e. the meaningfulness of work, its relational components, the incompleteness of the labour contract and its authority character, to the four moral motives identified by the Moral Foundations Theory, namely care, fairness/reciprocity, in-group/loyalty and authority. We show that due acknowledgement of the moral dimensions of the employment relationship entails making institutional transformations, namely strengthening rather than discarding employment law and reforming corporate law. Recognizing these moral dimensions would epitomize a radical break with mainstream economics and neo-liberal thought.

To be effective, an army must contain the extent of desertion among its ranks. This phenomenon rose to particular prominence in Europe during the 18th and 19th centuries, with the appearance of the figure of the “citizen-soldier” on the battlefield. This paper offers the first theoretical treatment of the issue of desertion from an economic perspective. Building on the work of Yoram Barzel on the “economic analysis of property rights,” we develop a “desertion as theft” framework. We then test the empirical implications of the framework against qualitative and quantitative evidence from Napoleonic France.

Yoram Barzel was always aware that competition is ubiquitous and takes many forms, and he was among the first to analyze settings where individuals compete on the basis of time, rather than price. This paper applies his insights to study the Oklahoma land rushes, where thousands of individuals raced to establish property rights to land. A simple modification of Barzel's analysis generates a model of rationing by racing, and we test its predictions using new data on the timing and location of over 73,000 homestead claims within the five distinct land rushes and one lottery. We find that increases in land quality or decreases in the cost of racing generate corresponding increases in the equilibrium speed, implying that potential rents are dissipated by investments in speed. The analysis highlights the lasting significance of Barzel's insights regarding non-price competition.

Alfred Marshall was elected to the Chair of Political Economy at the University of Cambridge in December 1884. He gave his inaugural lecture on ‘The present position of economics’ on 24 February 1885 (Groenewegen, 1995: ch. 10). An abridged version of this lecture is presented below.

This paper argues that technological advance is a necessary condition for sustained economic growth. Technologies and institutions co-evolve in a system of mutual causation. Although some institutions inhibit growth while others encourage it, no single institution is either necessary or sufficient to produce sustained growth. However, some non-unique bundle of encouraging institutions is necessary. Sustained growth began with the Industrial Revolutions that did not just ‘fall out of the blue’ but were instead the culmination of three trajectories of technological advance in steam power, electric power, and the mechanization of textile manufacturing. These stretched over several centuries. Growth then became sustained when the West ‘invented how to invent’. A necessary condition for the Industrial Revolutions was Western science whose roots lie as far back as the scholastic philosophers and the medieval universities. Its absence elsewhere is a sufficient reason why no other place developed its own indigenous industrial revolution.

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.

For two decades, economic agents have been investing in the personal data-driven industry on the assumption that courts, the keepers of the legal systems, would have backed their claims, turning their technological control of personal data into legally protected property rights. Courts' backing has proved only temporary as they are now revising early solutions by constraining collection, use, and trade of personal data to protect the hierarchically superior rights. The theory of ‘legal bubbles’ rationalizes the economics underlying the legal shockwaves affecting the personal data-driven economy. ‘Legal bubbles’ tend to arise when economic agents invest in the economic exploitation of a new resource in a context of uncertainty and ignorance about the legal implications of innovative activities. These legal foundations may eventually turn out to be unstable as a result of courts' ex-post attempt to re-adapt them to the previously ignored implications of unconstrained commodification, with disruptive economic consequences.

This is the second of two companion papers that discuss accidents caused by robots. In the first paper (Guerra et al., 2021), we presented the novel problems posed by robot accidents, and assessed the related legal approaches and institutional opportunities. In this paper, we build on the previous analysis to consider a novel liability regime, which we refer to as ‘manufacturer residual liability’ rule. This makes operators and victims liable for accidents due to their negligence – hence, incentivizing them to act diligently; and makes manufacturers residually liable for non-negligent accidents – hence, incentivizing them to make optimal investments in R&D for robots' safety. In turn, this rule will bring down the price of safer robots, driving unsafe technology out of the market. Thanks to the percolation effect of residual liability, operators will also be incentivized to adopt optimal activity levels in robots' usage.

This paper is about the mind of the embedded individual in heterodox economics. Beginning from Margaret Archer's analysis of modes of reflexivity and following the respective contributions of Geoff Hodgson and John Davis, the paper seeks to integrate into Archer's approach a place for habitual beliefs and an analysis of the ‘relative autonomy’ of the embedded individual. Archer's identification of modes of reflexivity is endorsed but her avoidance of any dispositional place for habit in the mind is questioned. It is argued that by excluding habits in this way, Archer, unlike Davis, implausibly assumes most individuals have achieved relative autonomy in their group associations. The essay develops an approach to the mind that articulates underlying relationships between habits and internal conversation, potentially enriching Archer's explanation of modes of reflexivity while locating Davis's notion of relative autonomy within that framework. Specific economic implications are then briefly considered.

The development of the American economy was accompanied by significant spatial income inequalities between the northern and southern regions. While many factors contributed to northern industrialization and southern stagnation, an important factor was differences in the region's institutions. In the North, a democratic institution fostered growth whereas in the South, oligarchic institutions favored status quo. To gain insights on the nature and causes of this divergence, this paper examines the development of political and legal institutions in Massachusetts and Virginia, the two leading states in the North and the South.

The major contribution of Oliver Williamson, who was a 2009 Nobel Prize co-Laureate in economics, consists of proposing a heuristic analysis of governance structures, namely, the firm, the market, and what he will later call the ‘hybrid forms’. This cardinal issue in organizational economics has made it possible to propose rigorous arbitration tools for the famous ‘make or buy’ decisions in modern market economies based on asset specificity and quasi-rents. However, Williamson's work goes far beyond these contributions alone. His contribution is based on a multidisciplinary theoretical background in building the science of organization. This is the important but sometimes neglected aspect of Williamson's work that I wish to highlight in this paper in memory of Williamson in regard to three major pieces on atmosphere (and informal organization), private ordering, and industrial pluralism. In doing so, I also propose reconsidering the different stages of Williamson's evolving science of organization from recent neo-institutional works.

This Article considers one aspect of the ongoing debate about the moral limits of markets – namely, the purported harmful effects of market transactions on particular relations, goods, services, or society at large, due to an inappropriate valuation. In other words, the argument is that some markets are ‘repugnant’ because they degrade and corrupt a variety of nonmarket values and relations, not just to the willing parties to the exchange, but to larger segments of society. This objection contains both a (frequently unacknowledged) empirical component and a moral component. This Article critiques these empirical claims on two grounds. First, market skeptics fail to provide evidence of the negative effects they hypothesize, despite widespread variation over time and across legal regimes. Second, these objections fail to account for the well-documented human tendency to fashion repugnant exchanges in a manner that reinforces – rather than undermines – deeply held values and relationships.

We can all agree that institutions matter, though as to which institutions matter most, and how much any of them matter, the matter is, paraphrasing Douglass North's words at the Nobel podium, unresolved after seven decades of immense effort. We suggest that the obstacle to progress is the paradigm of the New Institutional Economics itself. In this paper, we propose a new theory that is: grounded in institutions as coevolving sources of economic growth rather than as rules constraining growth; and deployed in dynamical systems theory rather than game theory. We show that with our approach some long-standing problems are resolved, in particular, the paradoxical and perplexingly pervasive influence of informal constraints on the long-run character of economies.

That governance within the firm is deliberate, conscious and hierarchical, based on authority is considered almost axiomatic. Chester Barnard is cited as an early theorist of this view. In this short article we review Barnard's original theory of authority, his later work and his private correspondence with F. A. Hayek, Michael Polanyi, Bertrand de Jouvenal and others. We show that Barnard focused in his later thinking less on authority and more on ‘responsibility’ and on the spontaneous nature of coordination within the firm, argued for ‘invisible hand’ explanations of coordination within the firm and compared coordination within the firm to market coordination. We use this information to produce novel insights into the work of Chester Barnard and also to demonstrate that his insights into the inner workings of firms is still not completely understood or reflected in the literature on the firm.