We investigate the impact of professional networks on men's and women's earnings, using a dataset of European and North American executives. The size of an individual's network of influential former colleagues has a large positive association with remuneration, with an elasticity of around 21%. However, controlling for unobserved heterogeneity using various fixed effects as well as a placebo technique, we find that the real causal impact of networks is barely positive for men and significantly lower for women. We provide suggestive evidence indicating that the apparent discrimination against women is due to two factors: first, both men and women are helped more by own-gender than other-gender connections, and men have more of these than women do. Second, a subset of employers we identify as ‘female friendly firms’ recruit more women but reward networks less than other firms.

We assess informal institutions of Protestants and Catholics by investigating their economic resilience in a natural experiment. The First World War constitutes an exogenous shock to living standards since the duration and intensity of the war exceeded all expectations. We assess the ability of Protestant and Catholic communities to cope with increasing food prices and wartime black markets. Literature based on Weber (1904, 1905) suggests that Protestants must be more resilient than their Catholic peers. Using individual height data on some 2,800 Germans to assess levels of malnutrition during the war, we find that living standards for both Protestants and Catholics declined; however, the decrease of Catholics’ height was disproportionately large. Our empirical analysis finds a large statistically significant difference between Protestants and Catholics for the 1915–19 birth cohort, and we argue that this height gap cannot be attributed to socioeconomic background and fertility alone.

This paper introduces Aristotle's conception of agency, habits and institutions as a way of contributing to some current discussions about the definition, nature and theory of institutions. Aristotle developed a theory of human action, where we can find a place for ‘agency’. His views on habits are linked to his theory of virtue and art (skill). Concerning institutions, Aristotle provides a sound social and political philosophy that encompasses the nature and role of institutions. The paper will subsequently present Aristotle's ideas on these three notions – agency, habits and institutions – and will finally establish which of the current accounts of institutions involved in the discussion sparked by Hindriks and Guala's recent paper (2005a) he would support. Given that some realities tackled in the paper are nowadays radically different from Aristotle's times, the paper tries to keep an ‘Aristotelian-minded’ point of view – that is, analysing current topics based on Aristotelian concepts.

In this paper I consider the implications of work in evolutionary psychology for institutional analysis. I respond to Pascal Boyer and Michael Bang Petersen (‘The Naturalness of (Many) Social Institutions: Evolved Cognition as their Foundation’; 2012), who put forward a programmatic statement in this connection. I argue that their discussion overstates the explanatory power of evolutionary psychology and does not take sufficient account of what we already know about institutions. At the same time, I suggest that they, and the empirical work upon which they draw, make an important contribution by helping us to establish more clearly the boundary conditions of institutional analysis. I call for ongoing cooperation and for the establishment of a unified research tradition that brings together both evolutionary psychology and institutionalism.

The article briefly introduces Hans Albert and the basic elements of his critique of neoclassical economics as a form of ‘model Platonism’. The two most important elements of his general methodological critique of economics – namely the institutional vacuum inherent in much economic modelling and its unrealistic assumptions about behaviour – are introduced. It is argued that these specific critiques have been taken up with varying degrees of success in areas of economic research such as institutional economics and in behavioural and experimental research programmes. However, the fundamental methodological gist of his critique remains as pertinent to mainstream economics as it was when originally formulated. The influence of ‘model Platonic’ thinking remains pervasive in academia and also in public policy.

This paper examines the fundamental nature of numbers as they are used in economic systems. In the framework proposed, number sequences are technological objects (‘tools’) that are constituted by both form and function. To do their job, number sequences have to have the necessary internal structure – all elements (e.g. symbols) of the sequence must be distinct from one another, and the sequence must be a progression. In addition, numerical toolkits have to have the right external structure – they must be situated in a social network of economic agents that confers on them quantitative functions (e.g. identifying set sizes). Number sequences are the product of multilevel evolutionary processes, including psychological selection that screens sequences for their learnability by human users. Number tools are a kind of capital; they are material systems that are as real as other everyday objects. Just as changing physical tools alters the structure of productive activity, so too changing number sequences alters cognitive, behavioral, and social routines.

Social contract theory depicts a constitutional contract as the result of a hypothetical agreement among society's members to escape a prisoners' dilemma situation. It depicts citizens as political equals agreeing to be forced into a cooperative strategy rather than a socially suboptimal strategy that gives them the highest personal payoff. Government is the organization that forces everyone to cooperate. However, citizens can never bargain as political equals. An elite few design the rules, and others are forced to comply with them. The contractarian ideology that depicts government as acting in the general public interest legitimizes the actions of government, giving those elite few who hold government power a greater ability to use it to further their own interests, often at the expense of the masses. Within the context of a prisoners' dilemma game, contractarian ideology leads to an outcome that is socially suboptimal, but beneficial for the political elite.

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.

The implications of Knightian uncertainty are frequently discussed in the context of market-based institutional settings. Given money prices, entrepreneurs can engage in calculative action, in conjunction with ‘judgment’, to guide decision-making and bring about a coordination of production plans with consumer preferences. However, if the existence of Knightian uncertainty is ubiquitous and applies to all human action, then what are its implications in non-market institutional settings? This paper explores questions related to the implications of Knightian uncertainty for two important non-market institutional settings: democratic government and the nonprofit or philanthropic sector, where there is an explicit lack of monetary calculation, yet nonprofit and political entrepreneurs still must use ‘judgment’ to deal with Knightian uncertainty. For instance, what are the implications of private property and privatized cost in the case of nonprofits versus the absence of private property and socialized cost in the case of democracy, in the presence of Knightian uncertainty? Which group of ‘consumers’ is likely to have their preferences satisfied when it comes to nonprofits (benefactors or beneficiaries) and democratic government (voters or lobbyists)? The paper, thus, points to the importance of further research on the implications of Knightian uncertainty in the hard case of non-market institutional settings.

History refers both to the past and to the systematic study of the past. Attempts to make a case for history in economics generally emphasize the first definition. There are benefits from increased attention to the past. This paper argues that significant benefits can be gained from increased attention to the systematic study of the past, the historian's craft. The essence of the historian's craft is the critical evaluation of sources. Failure to critically evaluate sources has the potential to lead to erroneous conclusions, whether one is using historical documents or more recently created data.

This paper reveals a novel and perhaps surprising ingredient in the mix of influences that inspired and informed the work of Elinor and Vincent Ostrom on self-governance: cybernetics, understood as a theory of control via feedback mechanisms. Based on this crucial insight, the paper portrays self-governance as involving an architecture of multiple levels of so-called ‘second order’ feedback mechanisms. Such compounded systems of organization are the key to understanding any self-governance process and the paper argues that their intrinsic logic provides a critical link between the work of the Ostroms and the public choice and constitutional political economy perspectives on institutional order. The paper thereby offers both a fresh perspective on the Ostromian view of self-governance and also of also of governance theory in general.

Local administrations play a key role in delivering adaptation to climate change. To do so, they need to address collective action. Based on transaction costs economics, this paper explores the role of so-called integrative and segregative institutions in the way local administrations adapt – whether their different functional branches respond to climate change collectively rather than independently. Through a comparative analysis of 19 climate-sensitive local administrations in Germany, the paper shows that variation in the way local administrations structure their internal coordination determines the way they approach climate adaptation. Under integrative institutions, local administrations adjust prior coordination structures to accommodate adaptation. Under segregative institutions, administrations move towards integrative institutions in order to adapt, provided they already ‘feel’ climate change.

The agency problem at the core of corporate law stems from a chronic potential conflict of interest between directors’ self-interest and that of shareholders. Corporate law views directors’ self-interest in terms of diverting welfare to directors at the expense of shareholders. Another component of directors’ self-interest – being perceived as maximizing shareholders’ welfare – is seen not as part of the agency problem, but as part of the solution (aligning directors’ incentives with shareholders’).

This is true only if taking actions that maximize shareholders’ welfare is also the optimal manner for a director to be perceived as maximizing welfare. However, directors have more appealing ways to be positively perceived. In conducting bias arbitrage, directors identify risks that shareholders over-estimate, take action to address the risk, and then take credit for the ‘lowered’ risk (i.e., shareholders’ corrected assessment of the risk).

Bias arbitrage is more attractive as shareholders’ misperception of a risk increases. The opportunity to bias arbitrage thus leads directors to address highly misperceived risks instead of highly remediable risks.

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.

Inspired by comments made by Allen (2017), Lueck (2017), Ménard (2017) and Smith (2017), this response clarifies and deepens the analysis in Arruñada (2017a). Its main argument is that to deal with the complexity of property we must abstract secondary elements, such as the physical dimensions of some types of assets, and focus on the interaction between transactions. This sequential-exchange framework captures the main problem of property in the current environment of impersonal markets. It also provides criteria to compare private and public ordering, as well as to organize public solutions that enable new forms of private ordering. The analysis applies the lessons in Coase (1960) to property by not only comparing realities but also maintaining his separate definition of property rights and transaction costs. However, it replaces his contractual, single-exchange, framework for one in which contracts interact, causing exchange externalities.

A growing strand of literature relates pro-market institutions to business and overall employment creation. However, the effects of pro-market institutions on industry-specific employment creation still need to be better understood. Employment creation in some industries may be more sensitive to pro-market institutions. Moreover, if these industries employ a large proportion of the population, the role of local-level institutions becomes more critical for boosting employment creation across industries. Therefore, we disentangle the effects of local-level pro-market institutions on employment creation across nine major industries by using 5-year balanced panel data of 374 US metropolitan areas from 1972 to 2017. Our fixed-effects results indicate that pro-market institutions boost employment creation only in the manufacturing, retail, and construction sectors. Furthermore, our findings reveal that local public policies can benefit or harm local employment creation, depending on the concentration of industries in the area.

This paper contributes to the debate on domestic revenue mobilization and state-building in the Global South by exploring the concept of fiscal states and the common assumption that such states are present in sub-Saharan Africa. We systematically review the diverse understandings of the fiscal state across relevant literatures to revisit its conceptualization. On that basis, we define the fiscal state as a state whose public revenue base is dominated by tax revenue and loans, and where the relationship between taxation and external and domestic borrowing is balanced and thereby sustainable and characterized by interdependence. We distinguish the fiscal state conceptually from the tax, debt, and rentier states and present a typology of these ideal state types, discussing illustrative empirical examples of different states in sub-Saharan Africa. These illustrate that not all sub-Saharan states can be categorized as fiscal states. This is important because when African states are regarded as fiscal states, assumptions are made about their economic structures; yet, to the extent that these are absent, fiscal policy reforms are unlikely to carry long-term positive effects.

This paper draws on macroeconomics, the economics of institutions and the economics of trust to explain private savings at the national level for 33 OECD (mostly European) countries from 2002 to 2012. More specifically, it raises two questions: (i) is it the quality of institutions or trust in institutions that drives private savings? (ii) if trust matters, what is the appropriate institutional level at which it operates? To answer these questions, we add to the usual explanatory variables of private savings three measures of institutional quality and six measures of institutional trust, distributed between the following institutional levels, presented in assumed hierarchical order: political, legal, financial and social. We find that trust in political institutions is the most significant driver of private savings. This contributes to the literature underlining the importance of subjectivity in social and economic phenomena and suggests, for private bank savings in countries having highly regulated banking systems, the existence of a hierarchy of trust in which trust in the highest-ranking institutions (political – and to a lesser extent legal – institutions) acts as a substitute for trust in every lower-ranking institution (financial institutions and social trust).

Academic freedom is a cornerstone of modern academic life. It is not only implied by basic liberal principles but also contributes to scientific progress and economic growth. It is therefore important to better understand what affects how free scholarly pursuits are, and to that end, we ask whether economic freedom can help explain variation in academic freedom across countries. In our case, relating the Economic Freedom of the World index and its five areas to V-Dem's index of academic freedom and its five areas reveals that the rule of law is positively and robustly related to academic freedom in all its forms. This suggests that the rule of law, in its general and broad sense, can arguably serve as a guarantor of academic freedom. Where the rule of law is weakened, academic freedom can be at risk. There are some indications that regulatory freedom is similarly related to academic freedom, but less robustly so, maybe indicating that interventionism in one policy area (economics) can breed interventionism in another (academia).

Discovering individuals' internal motivations for paying taxes is essential to a tax system since the basic assumption of any tax system is that most of the population pays their taxes voluntarily. This article examines the existence of a social aversion towards tax offenders in Israel as well as the variables that affect tax law compliance and increase tax payments. In this respect, the article presents quantitative questionnaire data collected by the author, which is based on a sample of 189 participants from Israel. The study shows that the social response to tax evaders exerts a greater impact on increasing tax law compliance than the fear of punishment per se and clarifies the importance of education for paying taxes.