This short commentary basically supports the unified approach to institutions of Hindriks and Guala (2014). First, using a flow diagram over the two-by-two boxes in the space spanned by the collective-individual dimension and the behavior (play)-cognitive (belief) dimension, it argues that the classical game theory and the so-called institution-as-rule theory are both incomplete and that they should be regarded as complementary for an integrated theory of institution as a process. However, the substantive forms of institutions ought to be linguistic representations (i.e. rules and ideas) that summarize equilibrium states of play of the societal game so as to mediate them to be incorporated into minds of players as collective intentionality (i.e. shared beliefs). From this perspective this note also supports the authors’ argument to unpack the ‘Y’ term in Searle's notion of constitutive rule (that is, the regulative rule) and submit it to be based on a neo-Hegelian notion of mutual recognition (i.e. equilibrium).

Buchanan's first writings about federalism and fiscal justice were “'Federalism’: One Barrier to Labor Mobility” and “A Theory of Financial Balance in a Federal State,” two term papers that he wrote before his dissertation and that have never been discussed before. Studying them allows us to complete the recent literature on the origins of Buchanan's fiscal federalism. We show that most of Buchanan's ideas about fiscal equity were already in these works, and also that Buchanan made other claims and used other arguments – about mobility, for instance – that were absent from the dissertation but remained important to him for a long time. We also analyze these essays in the context in which Buchanan was at that time, namely the economics department of the University of Chicago. We show how Buchanan fed on, not to say was influenced by, the courses for which he wrote these essays. This allows us to shed new light on the role Theodore Schultz, D. Gale Johnson, Henry Simons, and Roy Blough, played at the beginning of Buchanan's career.

In response to Paniagua and Rayamajhee's (2021) proposal for a polycentric approach for pandemic governance, Frolov (2022) notes that their paper focuses on preventive measures, and neglects the deeper, cognitive dimension of coproduction. In this essay, we extend the notion of coproduction to analyze the cognitive institutions that underlie social behavior during a pandemic. We analyze the role of coproduction and polycentricity in the emergence and persistence of shared mental models, including counterproductive models such as virus skepticism, conspiracy theory beliefs, and antivaccine narratives.

We study the value of the political connections of directors on Chinese boards. We build a new dataset that measures connections of directors to members of the Politburo via past school ties, and find that private firms with politically connected directors in the boardroom get on average about 16% higher subsidies over sales per firm (7 million yuan). Connected state-owned enterprises (SOEs) access debt at 11% cheaper cost, which translates into average savings of close to 32 million yuan per firm in lower interest payments. We find that the value of the political connections persisted after the anti-corruption campaign (ACC) of 2012. It became weaker for the cost of debt in SOEs, but stronger for subsidies to private firms. We argue that the value of connections in the private sector increased after the ACC because they became a less risky alternative to corruption. We also show that connected firms do not perform better.

Frank A. Fetter is often classified as an American representative of the Austrian school, yet surprisingly, there is practically no published record of his views of the Austrians or theirs of him, and there is no indication that he ever seriously interacted with them after the First World War. However, Fetter enjoyed many personal and professional relationships with the Austrians, and they shared a reciprocal influence on each other's ideas that deeply influenced their respective research programs. This paper draws on unpublished archival records to explore Fetter's unique place in the history of economics, in particular, his positive and negative interactions with the leading individuals and institutions of the Austrian school. Their half-century of influence sheds light on Fetter and his role in American economics, but also brings to light a wide range of information about the lives, works, and personal relations of the Austrians that have not been included in their biographies or institutional histories.

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.

People have rights to the degree that they are willing to claim them and are able to enforce them, either themselves or through a third-party enforcer. This economic theory of rights is based on the rights people actually do have and are able to exercise, not the rights they should have based on some normative criteria. Natural rights theories and contractual rights theories are examined and found to be ambiguous as to the actual rights they imply. Furthermore, there is no assurance that people will actually be able to exercise any natural rights or agreed-upon rights. People's actual ability to claim and enforce rights is based on the economic and political power they have, which in turn is based on their ability to provide benefits to others in exchange for others respecting the claimed rights, and in some cases being willing to use force to make others respect them.

Silvestri interviews McCloskey about her forthcoming book, ‘Beyond Behaviorism, Positivism, and Neo-Institutionalism in Economics’, critical of recent economics, especially of neo-institutionalism. Neo-institutionalism uses the ugly character ‘Herr Max U’ as its central idea: the elevation of Prudence to the only virtue. Institutions are mainly intermediate, not ultimate, causes in society. Ethics, rhetoric, identity, ideology, and ideas matter. McCloskey's turn to defending liberalism is in the background of her critique of behaviorism, positivism, and neo-institutionalism as anti-liberal, reducing the analysis of people to a model of childish slaves. Liberalism is the theory of non-slave adults. Of the big ideas of the past few centuries, only liberalism treats people with suitable dignity, and permits them to have a go, and make others rich. Neo-institutionalism shares the two sins of modern Samuelsonian economics: a devotion of mere existence proofs; and a deviation to arbitrary tests of statistical ‘significance’. And in its tale of a rise of ‘capitalism’, it shares the errors of amateur economic history. The better word for the modern economic world of the Great Enrichment – fully 3,000% increases in real income per person – is ‘innovism’. Neo-institutionalism, as the method of historical economics, must be replaced by ‘Humanomics’.

This study examines the type and quality of institutions in Palestine and the correlation between the institutions and economic growth in Palestine from 1516 to 1948. Initially in the 16th century, with the Ottoman conquest of the area, institutions in Palestine involved de facto private user-rights. The level of expropriation by elites was low, and this enabled the people to develop the lands that they had acquired the right to cultivate. In the 17th and 18th centuries, with the exception of the Galilee in the middle of the 18th century, institutions became extractive due to tax farming, rapacious governors and Bedouin raids. From the middle of the 19th century until 1948, there was a second reversal back to private property institutions, first slowly until the First World War, and then more rapidly under the British Mandate after the First World War. When there were private property institutions the economy prospered, while when there were extractive institutions, the economy stagnated.

In this paper, we examine the bi-directional relationship between financial globalization (proxied by foreign direct investment (FDI) flows) and economic institutions (proxied by central bank independence (CBI)) taking into consideration the role of political institutions. We test our argument on a sample of 48 African countries (1970–2012) using a two-step System Generalized Methods of Moments, with collapsed instruments and Windmeijer robust standard errors. Using two proxies for CBI, the study finds that while legal CBI does not have a significant impact on FDI, high central bank governor turnover rates have a significantly negative impact on FDI inflows. However, higher levels of political institutions significantly enhance the impact of legal CBI on FDI inflows, and dampen the impact of high central bank governor turnover rates on FDI inflows. The study also shows that, higher FDI inflows have a significantly positive impact on both legal and de facto CBI. This impact is accelerated in countries characterized by higher levels of political institutions.

Development scholars have identified several Hofstede (1980, 2001) cultural dimensions as critically important determinants of long-run economic development across countries. Does economic progress, in turn, shape culture in a predictable direction? This paper investigates whether economic change since 1970 has induced shifts in five of the Hofstede value orientations in a sample of up to 72 countries. To achieve identification, we employ a unique data set on country-level cleavages in the values of two non-overlapping age cohorts approximately one generation (30 years) apart, on average. We find evidence that faster-growing countries during the period of coming of age and personality development of the younger cohort witnessed the rise of more individualistic and politically egalitarian generations, suggesting the existence of a self-perpetuating cycle between certain “good-for-development” cultural attitudes and economic development.

How do gifts relate to formal and informal institutions? Giving gifts, especially in the form of anti-poverty aid, opens the givers to a serious social dilemma: the Samaritan's dilemma. We explain how the Church of Jesus Christ of Latter-day Saints uses a mixture of formal and informal governance to provide sustainable social welfare programs that avoid this dilemma. These institutions not only govern aid arrangements, but also provide governance across the entire Church community, encouraging religious adherence and broad-based participation.

This paper seeks to answer the question of what psychological preconditions must exist for institutions to determine behaviour and order our societies. We defend the notion that institutional theory may gain from such a contribution. We introduce a new theory of the mind as a network structure within which the psychological process operates to integrate insights from cognitive and affective psychology into institutional theory. We discover that institutions must be expressed as rules in mental networks which guide thinking and behaviour, be embedded within a cognitive apparatus such that they are called to mind by perception to so guide thinking and behaviour and be anchored to emotion such that they are endowed with urgency in order for them to have a hold on individual behaviour. From this theory we derive definite predictions, as well as policy insights.

This paper explores associations between disturbances and cooperative responses in a selection of irrigation associations from Spain. Transaction costs and collective action theories are used to characterize disturbances and responses. Disturbances are characterized by looking at the uncertainty they generate, their frequency, the distance of the transacting partners they affect, and their impact on asset-specific transactions. Responses are assessed based on the collective action tasks they involve and classified into coordination and cooperation responses. A qualitative comparative analysis confirms two pathways that are sufficient for the emergence of cooperation responses. The first path is congruent with transaction costs theory, and points to disturbances that are frequent and asset specific; the second path supports relational theory, and points to disturbances that emerge progressively from within the system. Other patterns include the tendency of irrigation associations to delegate to external entities when disturbances are external and occur frequently; and the adaptation of existing institutions when the disturbances are internal and progressive.

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 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.

Since the early 1980s a wave of liberalizing reforms has swept over the world. Using panel data from 30 European countries in the period 1993–2015, we test the hypothesis that such reforms have led to voter dissatisfaction with democracy, since, it is argued, they have been undertaken in a non-transparent way, often during crises, and they have entailed detrimental consequences. The reform measures are constructed as distinct changes in four policy/institutional areas: government size, the rule of law, market openness, and regulation. Our results indicate that while reforms of government size are not robustly related to satisfaction with democracy, reforms of the other three kinds are – and in a way that runs counter to anti-liberalization claims. Reforms that reduce economic freedom are generally related to satisfaction with democracy in a negative way, while reforms that increase economic freedom are associated positively with satisfaction with democracy.

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.