Standard health economics concentrates on the provision of care by medical professionals. Yet ‘care’ receives scant analysis; it is portrayed as a spillover effect or externality in the form of interdependent utility functions. In this context care can only be conceived as either acts of altruism or as social capital. Both conceptions are subject to considerable problems stemming from mainstream health economics’ reliance on a reductionist social model built around instrumental rationality and consequentialism. Subsequently, this implies a disregard for moral rules and duties and the compassionate aspects of behaviour. Care as an externality is a second-order concern relative to self-interested utility maximization, and is therefore crowded out by the parameters of the standard model. We outline an alternative relational approach to conceptualising care based on the social embeddedness of the individual that emphasises the ethical properties of care. The deontological dimension of care suggests that standard health economics is likely to undervalue the importance of care and caring in medicine.

In response to Pelikan, Witt, Foster, and Colander, we reiterate our main contributions: (1) our more careful demonstration of why ‘mechanistic’ models have limited application, (2) our account of novelty as a system-level phenomenon, and (3) our identification of ‘novelty intermediation’ as important to creative economic dynamics. We also address some of the criticisms raised by the commenters. Pavel Pelikan's idea of stochastic causality does not somehow eliminate unprestateable change. We do challenge certain strong notions of universal causation, as Ulrich Witt notes, but such notions are probably best abandoned. Although, we do not repudiate mathematical modeling as our paper suggested to John Foster, we may give less scope than Foster to such methods. Finally, we point out the extreme difficulty of implementing the sort of engineering vision Colander articulates.

In their stimulating paper, Hindriks and Guala (2014) bridge the prominent alternative conceptions of institutions-as-rules and institutions-as-equilibria, by proposing a ‘rules in equilibrium’ interpretation. This comment argues that the task of defining institutions as a class of phenomena is different from the tasks of understanding or analysing them. Definitions are classification devices and are typically ill-based on behavioural outcomes such as equilibria. Accepting the useful insights of the Hindriks and Guala (2014) article, attention to the matter of definition reinstates a rules-based approach, notwithstanding the importance of understanding and analysing equilibria. The comment establishes a broad definition of institutions as systems of rules, which includes organizations. Finally this comment raised some of the problems involved in understanding the nature of institutional rules.

This paper examines markets, firms, and the law as alternative institutional arrangements for organizing transactions that involve transaction-specific investments and uncertain performance. The analysis is the logical extension of Coase's seminal analysis of the market-firm boundary on one hand, and the market-law boundary on the other. It thus combines insights from the literature on industrial organization and law and economics. The result is a unified framework that reveals the relative advantages and disadvantages, within a fairly simple economic setting, of market exchange, court ordering (contracts), and internal governance (agency).

Hackerspaces are community-operated physical places where individuals get together to build things. While the organization itself is private, the ‘space’ that is created for individuals to work has elements of a common pool resource (CPR). The previous literature finds technology to be important in effective CPR management. Through an ethnographic study of a hackerspace, we show how technology is crucial for management of the ‘space’. In addition, we highlight how technology is used in hackerspaces to satisfy three of Ostrom's design principles for stable CPR management.

This paper revisits Coase's original description of the Institutional Structure of Production, and disentangles its two constitutive elements: (i) the costs of organizing an activity internally and (ii) the costs deriving from the transaction of the activity on the market. In doing so, I show transaction costs (TC) to be always necessary and sufficient to explain institutions, but only in the Slutsky–Hicks and Samuelson ordinal framework where expenditure functions replace utility functions and actors merely transact services and never control, nor own goods. Yet, if actors can purchase (and therefore control) resources, utility in use cannot be univocally deduced from purchasing behaviours; here ordinal exchange theory must be replaced by Austrian subjective cardinal value theory, where value in use and value in exchange do not coincide. To explain the allocation of activities among firms in this case, actors’ subjective opportunity costs are thus always necessary (and possibly sufficient), while TC are never sufficient. This distinction has fundamental implications for at least two main developments of Coase's original insights: the relationship among competition, socialist planning and the nature of the firm, and the reinterpretation of the Austrian concept of asset specificity in contemporary institutional and organizational economics (OE).

A main instrument for better understanding the formation of institutions, and explaining the differences in their long-run development between periods and societies, would be to use history as a laboratory, allowing us to test the hypotheses developed in the social sciences. This paper discusses the study by Douglas Allen, The Institutional Revolution, in that context, in order to identify some of the pitfalls in the current attempts by economists to use historical analysis. Next, the paper places his English case into a comparative perspective, helped by the recent insights gained by economic and social history, to see how these pitfalls can be avoided. Based on this, I argue for comparisons at the regional, national and global levels, and for a multidimensional view which includes social contextualization, combined with an open eye for discontinuity in long-run patterns, in order to avoid one-dimensional and teleological approaches to institutional change.

Hindriks and Guala (2014) hope to provide a unified account of institutional theory that will combine the accounts of regulative rules, constitutive rules, and equilibria. I argue that only the constitutive rule approach has any possibility of success, and that the other two cannot even pose the right questions, much less answer them. Hindriks and Guala think constitutive rules can be reduced to regulative rules. I argue that their reduction is mistaken. The key to understanding social ontology is understanding status functions.

Coase always expressed dissatisfaction with neo-classical economics and advocated for a new approach. Rather than using toy mathematical models built from unrealistic, idealized assumptions, Coase preferred to study real-world contexts, including actual legal cases. He demonstrated the utility of his approach in ‘The Problem of Social Cost’. Yet almost all of Coase's contemporaries completely ignored, Coase's call for a new approach and his sustained use of legal cases to illustrate his arguments and to situate his analysis in reality. In this paper, we show that the profession interpreted Coase's seminal article exactly the opposite of what he had intended, and reduced his analytical contributions to a toy model of the exact sort he was criticizing. This ironic history of the most cited article both in law and in economics helps us understand the development of ideas within both fields and how disciplinary blinders shape intellectual progress.

Our goal is to develop a theory that combines the best insights of philosophical and scientific theories of institutions. We are not committed a priori to save the commonsense notion of institution, or the thesis of human exceptionalism. We think that human cognition is important, but we do not claim that common knowledge or collective intentions are necessary for coordination. Like most of our commentators, we believe that there is continuity between simple rules of precedence and sophisticated institutions like property, marriage, or money. Finally, we argue that a satisfactory account of institutions must be compatible with different theories of normativity, specifying the social and psychological mechanisms that make it possible to override selfish desires.

The informal institutional structure embraces the social norms and moral values of a particular society and together with the formal institutional frame, they compose the social environment. Social norms and values, congealed into customary rules of behaviour, provide a stable and enduring context to economic life that acts positively or negatively on economic activity. Despite their methodological and theoretical differences, Mill and Marshall have both suggested that individual economic decisions are fully embedded in their social environment. Thus, in order to explain the economic phenomena, from simple transaction processes to long term development, they adopted a broader perspective by including the social frame inside which economic choices are made, divulging the role of custom, yet in a quite distinctive way.

Ronald Coase detested ‘blackboard economics’ and as a result was often criticized for being ‘against theory’. Coase has also been criticized for being overly descriptive in his institutional analysis. Here, I claim that Coase was both theoretical and interested in hypothesis testing. In order to do Coasean analysis, however, it is necessary to analyse a subject matter at the deep transaction level, given the definition of transaction costs. The rich level of detail required may give the impression of an absence of theory or testing. Here, I provide a number of real farm examples and contrast them with blackboard farm economics to make this point.

The purpose of this special topic forum is to call for research on the topic of minds and institutions. I briefly discuss three specific research opportunities: (1) bounded rationality versus mind, (2) many minds and the interfaces of institutions, (3) the affordances of institutions and arbitrage. I then briefly introduce the two special topic forum papers and highlight how they link to the topic of minds and institutions.

The Coase theorem, circa the 1970s, had no settled meaning or content; instead, that meaning and content was created – and in differing ways – by the modeling choices of scholars who attempted to grapple with and assess the proposition that Coase had laid out in 1960. These modeling decisions included both the theoretical frameworks laid onto the theorem and the assumptions (including meanings ascribed thereto) said to underlie it. The present article illustrates this using the 1960s and 1970s extortion debate as a backdrop, showing how conclusions reached regarding the theorem's validity hinged on the Coase theorem worlds created by the authors involved.

This paper contributes to the growing literature on the links between political regimes and economic development by studying the effects of years in office on economic development. The hypothesis is that dictators who stay in office for a long time period will find it increasingly difficult to carry out sound economic policies. We argue that such economic policies are the result of information asymmetries inherent to dictatorships (known as the ‘dictator dilemma’) and of changes in the personality of dictators (known as the ‘winner effect’). We call the combination of these two terms the ‘dictator effect’. We present evidence to suggest that long years in office impacts on economic growth (which is reduced), inflation (which increases) and the quality of institutions (which deteriorates). The negative effect of long years of tenure (i.e. the ‘dictator effect’) is particularly strong in young states and in Africa and the Near East.

Daron Acemoglu, James Robinson and others are explaining divergent economic histories with qualitative measures of institutional quality – including Acemoglu and Robinson's popular inclusive/extractive dichotomy. While quantitative studies have sort to confirm these links using econometric proxies, few empirical accounts have shown how these proxies, or indeed the institutions they seek to represent actually influenced economic growth. This study helps fill that gap by testing whether evidence in Zambia's post-colonial history supports a proposed econometric link between its institutional quality and its slow economic growth. Support for this link is found in foreign investors’ interpretation of declining institutional constraint on Zambia's President as the potential for increased policy volatility, and as such an economic inducement to delay critical investment to Zambia's capital constrained economy. These findings add weight to the institutional argument in general, as well as present one concrete example in history of a mechanism through which institutional quality affected economic growth.

There exists a long line of challengers to the ‘Coase Theorem’. All of these rest on fundamental misconceptions of property rights, transaction costs, and their interaction. Here I examine two attacks that have gone unchallenged: one by Halpin, the other by Usher. I argue that both, in failing to either use or understand an adequate definition of transaction costs, fail to deliver a fatal blow to Coase's famous idea.

This paper contributes to the literature by conducting the first empirical investigation into the determinants of prosocial behaviour in the Palestinian Territories, with a focus on the role of trust and institutions. Drawing on a unique dataset collected through the administration of a questionnaire to a representative sample of the population of the West Bank and the Gaza Strip, we have found that institutional trust is the strongest predictor of prosociality. This result suggests that, in collectivist societies with low levels of generalized trust, the lack of citizens’ confidence in the fairness and efficiency of public institutions may compromise social order. The strengthening of institutional trust may also reinforce prosocial behaviour in individualist societies, where a decline in generalized trust has been documented by empirical studies.

In this work we analyze the characteristics and dynamics of organizations wherein members diverge in terms of capabilities and visions they hold, and interests which they pursue. In particular we examine how different forms of power can achieve coordination among such diverse capabilities, visions, and interests while at the same time ensuring control and allowing mutual learning. By means of a simple simulation model of collective decisions by heterogeneous agents, we will examine three different forms of power, ranging from the power to design the organization, to the power to overrule by veto or fiat the others’ decisions, to the power to shape the very preferences of the members of the organization. We study the efficiency of different balances between the three foregoing mechanisms, within a framework in which indeed organizations ‘aggregate’ and make compatible different pieces of distributed knowledge, but the causation arrow goes also the other way round: organizations shape the characteristics and distribution of knowledge itself, and of the micro ‘visions’ and judgements.

A growing literature in the fields of economics and political science has identified the importance of culture for both economic development and good governance. In this article, we argue that a fundamental factor driving cultural traits conducive towards development and governance is inter-personal income inequality. Our empirical evidence from a cross-section of countries and based on measures of culture extracted from the World Values Survey, provides strong support for our argument even after controlling for the effect of an extensive range of potentially confounding variables and the possibility that our estimates may suffer from both measurement error and reverse causality.