Some economic analysis concludes that capitalist institutions tend to produce growing income inequality. Piketty (2014 Capital in the Twenty-First Century., Cambridge: Harvard University Press) is a recent example. This paper uses two different datasets on income shares of the top 10% to analyze the effect of market institutions on income inequality. The same empirical specifications give different results for the two datasets. This empirical investigation suggests that whether market institutions generate income inequality is an open question.

From the legal point of view, ‘person’ is not co-extensive with ‘human being’. Nor is it synonymous with ‘rational being’ or ‘responsible subject’. Much of the confusion surrounding the issue of the firm's legal personality is due to the tendency to address the matter with only these, all too often conflated, definitions of personhood in mind. On the contrary, when the term ‘person’ is defined in line with its original meaning as ‘mask’ worn in the legal drama, it is easy to see that it is only the capacity to attract legal relations that defines the legal person. This definition, that avoids the undesirable emotional associations and equivocations that often plague the debate, is important for a legally grounded view of the firm.

Copyright laws traditionally attempt to incentivize expression and minimize free rider problems through legal restrictions, at the expense of closing off access to cultural history. However, entrepreneurial changes to institutions and the creation of alternative governance structures can allow for spaces that facilitate expression without resorting to the copyright approach. Wikipedia, the free online encyclopedia, stands as a highly visible example of such institutional entrepreneurship, leveraging copyright law against its intended purpose. This paper uses the Bloomington School's IAD framework to explain the success of Wikipedia's alternative model of managing a common resource of free encyclopedia articles, and suggests a roadmap for understanding the role of institutional entrepreneurship in crafting alternative governance structures to foster expression.

‘Institutions’ do not mean the same thing to Samuelsonian economists as they mean to other people. North's ‘rules of game’, like chess, dominates, even when it is claimed that ‘informal institutions’ are allowed into the tale. The tale is that institutions were once clotted, and then became unclotted, and the Great Enrichment occurred. But the enrichment was by a factor of upwards of a hundred, which cannot be explained by routine movements to an efficient equilibrium. And changes of institutions did not in fact happen much in England. Ethics changed, not laws and procedures. For presently poor countries, too, it will not suffice, as the World Bank and Acemoglu recommend, to add institutions and stir. Economies rely on ethics, which neo-institutionalists, being at heart Samuelsonian, have not wanted to admit. Ideas matter. Indeed, metaphors and stories matter, as in Searle's account.

This paper is an analysis of the role reputation plays in the Deep Web using data from the Internet black-market site, The Silk Road. This encrypted online marketplace employed cryptocurrency and functioned over the Tor network. Utilizing a modeling technique, informed by trade auction theory, we investigate the effect of seller reputation. Analysis of the seller's reputation gives us insights into the factors that determine the prices of goods and services in this black marketplace. Data on cannabis listings is parsed from the Silk Road website and covers an 11-month time period, from November 2013 to October 2014. This data demonstrates that reputation acts as a sufficient self-enforcement mechanism to allow transactions. These findings exemplify the robustness of spontaneous order with respect to the Deep Web as an emergent marketplace.

This contribution aims at an original comparison of development analysis with Elinor Ostrom and Esther Duflo from a methodological standpoint, scrutinising their relationship to theory and their operative research strategies. Both perspectives are investigated as case studies for a broader discussion about significant trends in economics and social sciences. Duflo and the J-PAL's approach illustrates – in its own way – new trends and some blind alleys in contemporary forms of mainstream economics, whereas Ostrom and the Bloomington school point towards the marked theoretical and methodological reflexivity of institutionalism, its sensitivity to historical diversity and openness towards social sciences. Distinct social philosophies and episteme are at stake displaying a great divide between two brands of realism and pragmatism, two relationships to development, expertise and knowledge. The paper also contrasts Duflo's methodological monism and mechanistic piecemeal analysis with Ostrom's methodological pluralism and adaptive complex systems analysis.

This paper provides an empirical test of the Engerman–Sokoloff hypothesis that factor endowments influenced the development of the rule of law, which in turn has perpetuated income inequality. Using a measure of the suitability of land for growing wheat relative to sugarcane as an instrument for the rule of law, as measured by area 2 of the Economic Freedom of the World index, we estimate the potential causal impact of the rule of law on the long-run net income inequality. Conditioning on geography, ethnolinguistic fractionalization and legal tradition, the rule of law exerts a negative impact on inequality that is both economically and statistically significant. The results are robust to additional control variables, two alternative measures of the rule of law, an alternative instrumental variable and the exclusion of strategic country samples and outliers.

Professor McCloskey makes many telling and insightful points in her survey and criticism of what she terms the new institutional economics; yet there are a number of shortcomings to her paper. One is that she has bundled together a variety of quite disparate approaches to the role institutions play, and refers to them as ‘neo-institutionalist’. We unbundle these different strands, and show that an undifferentiated critique is unwarranted. A second argument made by her is that an institutional approach cannot explain either the Industrial Revolution or what she calls ‘the Great Enrichment’. We show that this conclusion is unwarranted and results from an overly narrow definition of institutions.

Deirdre McCloskey is right, economists interested in comparative development ought to pay more attention to the history of ideas. But, which ideas? And how do they emerge? In this short paper I argue that other ideas, besides the bourgeois ethics, are at least as important. And that a new emphasis on ideas does not make institutions less important, nor does it require that we abandon the traditional method of economics.

Elinor Ostrom and her colleagues in The Workshop in Political Theory and Policy Analysis at Indiana University in Bloomington conducted fieldwork in metropolitan police departments across the United States. Their findings in support of community policing dealt a blow to the popular belief that consolidation and centralization of services was the only way to effectively provide citizens with public goods. However, subsequent empirical literature suggests that the widespread implementation of community policing has been generally ineffective and in many ways unsustainable. We argue that the failures are the result of strategic interplay between federal, state, and local law enforcement agencies that has resulted in the prioritization of federal over community initiatives, the militarization of domestic police, and the erosion of genuine community-police partnerships.

This article seeks to explain the lack of the development of contemporaneously ‘modern’ money and credit markets in the 18th to 19th century economy of India. Borrowing from the literature on property rights, it demonstrates that the emergence of ‘modern’, and state-connected money markets was the result of a certain kind of power relationship between rulers and financial capital holders where the two were forced to mutually cooperate; financial systems represented the institutionalization of this mutual cooperation. Specific kinds of ‘colonialism’ represent just one special case of a relationship where the latter did not obtain. The article thus proposes a mechanism though which the spread of European capital could have retarded financial market formation in now-developing areas with otherwise considerable concentration of ‘native’ mercantile capital.

Externalities are an important concept in economic theories of market failure, aiming to justify state regulation of the economy. This paper explores the concept of externalities from a philosophical perspective. It criticizes the utilitarian nature of economic analyses of externalities, showing how they cannot take into account values like freedom and justice. It then develops the analogy between the concept of externalities and the ‘harm principle’ in political philosophy. It argues that the harm principle points to the need for a theory of basic interests to judge when a harm is imposed. Similarly, externality analyses should use such a theory of basic interests as the basis for judgments about legitimate state intervention. This proposal is defended against objections, and illustrated with a case study of the US Supreme Court's ruling on the Affordable Care Act, which shows how the judicial reasoning implicitly interprets externalities in terms of basic interests.

This essay explores the trade-off between strong and weak intellectual property rights inside firms with reference to the importance of job termination. The probability of job termination has an effect on the relative profitability of different intellectual property rights regimes. Weak intellectual property rights may make it more attractive for skilled workers to join the firm, which will increase its profits while employing workers. However, when a job match is terminated the firm is left with the ownership of intellectual property only under a strong intellectual property rights regime. Based on the institutional complementarities approach we develop a simple model that analyses this trade-off, in which multiple organisational equilibria exist. We show that when intellectual property rights are taken into account, expectations such as increase in the skill and knowledge content of work are not inevitable in the knowledge economy.

Deirdre McCloskey's recent claim in this journal that the formal institutions of government do not explain the ‘bulk’ of modern income levels is examined. In fact, they do.

What does being money consist in? We argue that something is money if, and only if, it is typically acquired in order to realise the reduction in transaction costs that accrues in virtue of agents coordinating on acquiring the same thing when deciding what thing to acquire in order to exchange. What kinds of things can be money? We argue against the common view that a variety of things (notes, coins, gold, cigarettes, etc.) can be money. All monetary systems are best interpreted as implementing the same basic protocol. Money, i.e. the thing that we coordinate on acquiring in order to lower our transaction costs, is, in all cases, a set of positions on an abstract mathematical object, namely a relative ratio scale. The things that we ordinarily call ‘money’ are merely records of positions on such a scale.

Theories of competitive federalism generally focus on exit as the principal mechanism for making governments responsive to the interests of those who are subject to their powers. This paper draws attention to the fact that democratic governments act in two distinguishable roles, as ‘territorial enterprises’ and as ‘club enterprises’. As territorial enterprises they define and enforce the rules and terms that apply to everybody, whether citizen or alien, who resides and/or operates within their jurisdictional boundaries. As club enterprises, they define and enforce the rules and terms of membership in the respective polity. The focus of this paper is on the implications of the fact that ‘exit’ means something different when one looks at governments’ role as territorial enterprises (exit = leaving the territory) in contrast to their role as club enterprises (exit = giving up one's membership status/citizenship).

Ludwig von Mises seems to be something of an outlier within the Austrian school when it comes to capital – though his position is clearly foreshadowed in a neglected article by Carl Menger (1888). In this paper, we examine Mises's view on capital and suggest that it constitutes a bridge between Austrian and institutional economics. As an outflow of Mises's approach, an incipient financial approach may be discerned, an approach to capital that integrates concepts from financial theory into a broader view of capital that contains both institutional and Austrian elements.

Legal scholars, economists and other social scientist often refer to the idea that countries can be classified into a number of ‘legal families’ or ‘legal origins’. Yet, this research is unsatisfactory as regards the actual classifications of the legal systems of the world. It is the aim of this paper to fill this gap and to develop a more robust taxonomy of legal systems. This taxonomy is based on a new dataset of 156 countries that is subsequently analysed with tools of network analysis. Applying cluster optimisation, this paper finds that the world's legal systems can be divided into four clusters. It displays those clusters in a map, akin to the Inglehart–Welzel cultural map. It is suggested that those findings have important implications, not only for our understanding of the legal world, but also for the feasibility of legal transplants and harmonisation.

In ‘Max U versus Humanomics: a Critique of Neoinstitutionalism’, Deirdre McCloskey tells us that culture matters – maybe more than do institutions – in explaining the Great Enrichment that some parts of the world have enjoyed over the past 200 years. But it is entrepreneurship, not culture or institutions, that is the proximate cause of economic growth. Entrepreneurship is not a hothouse flower that blooms only in a culture supportive of commercial activity; it is more like kudzu, which grows invasively unless it is cut back by culture and institutions. McCloskey needs to tell us more about the structure of the relationship among culture, institutions, and entrepreneurship, and thus to continue the grand project begun by Schumpeter.

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.