We undertake a close textual study of the entire corpus of Ludwig Lachmann's publications from 1936 to 1991 and demonstrate that his theory of entrepreneurial behaviour is sufficiently distinctive to warrant ranking alongside the theories of Schumpeter and Kirzner. Lachmann's entrepreneurs are creatively constructive change-agents who discover, exploit and create gaps in capital structures. Entrepreneurs select and interpret specific market and institutional phenomena using pre-existent rules and mental ‘instruments’, extract meaning about capital-forming opportunities, and generate all subsequent capital combinations. Lachmannian entrepreneurs are problem-solvers and communicate problem ‘solutions’ by dissolving and reforming capital combinations. We examine 20th-century Lachmannian research that builds on these foundations – research that emphasizes the institutional and material embeddedness of entrepreneurial behaviour and that appreciates the capacity of Lachmann's approach to explain entrepreneurial success, imitation and failure in a dynamic endogenous process. To underscore the distinctiveness of the Lachmannian entrepreneur, we compare it with Schumpeterian and Kirznerian approaches.

We challenge the ‘big-bang’ approach to economic history offered by Acemoglu et al. (2011). The creation story in dispute is the French Revolution and the subsequent French occupation of a very small portion of Germany. We show that the four institutional reforms claimed to have spurred German industrialization have been incorrectly dated. These corrections nullify any explanatory power of the ACJR econometric model. Moreover, even with the corrected vintages, their identification strategy is undermined by a flawed ‘explanatory’ variable – ‘years of reform’. We show that this variable simply enters their model as a year trend and explains nothing except the passage of time. We develop a fixed-effects model to capture the overlooked role of coal production that began in several regions shortly after 1840. This model offers a credible account of German industrialization and urbanization. Most economic change is, after all, continuous. Big-bang intrusions are of doubtful efficacy.

Lawmakers can choose to craft laws with different levels of detail to guide judges in their decision-making process, incorporating rules or standards into the laws they write. The optimal degree of specificity of legal rules under different environmental conditions and the functionality of these rules or standards are the subjects of the present study. A basic model of optimal specificity of laws is presented, clarifying the relevance of legal obsolescence and volume of litigation in the optimal choice. We then consider the important influence of codification style, judges’ specialization, and complexity of reality on the optimal choice of legislative instrument. The implications of our results are then reexamined in light of the more complex institutional reality that characterizes contemporary legislative processes in various areas of the law.

Most current explanations of the crisis which began in 2007/8 tend to search for scapegoats, in the format of behavioral flaws. Their treatment of ‘risk’ is an important signpost to where such theories go awry. This paper suggests a structural theory of the crisis, informed by Institutionalist themes. We insist there is an alternative to a neoclassical macroeconomics, in the guise of possible alternative heterodox microfoundations for Minsky's account of economic crises, beyond the Kaleckian markup model. The sketch is based upon elevation of some formal notions of computational complexity to pride of place, and characterization of crises as a collapse of complexity. It is an attempt to portray a market system evolving to a point of ‘inherent vice’: an endogenous development which by its very nature, cannot be tamed through conventional insurance or risk models.

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.

From a modern institutional economics viewpoint, blockchain is an institutional technology that minimizes transaction costs and greatly reduces intermediation. Through an analysis of blockchain, I demonstrate the possibilities of extended institutional approach – a new generation of complexity-focused methodologies and theories of institutional analysis that complement and expand the standard institutional paradigm. By using the theory of transaction value, I argue blockchain technologies not only will lead to a significant reduction in transaction costs but will also reorient intermediaries toward improving the quality of transactions and expanding the offer of additional transaction services. The theory of institutional assemblages indicates it is impossible to form a homogeneous system of blockchain-based institutions associated exclusively with the principles of decentralization, transparency, and openness. Blockchain-based institutions will be of a hybrid and conflicting nature, combining elements of opposing institutional logics – regulatory and algorithmic law, Ricardian and smart contracts, private and public systems, and uncontrollability and arbitration.

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.

Social and cultural determinants of economic institutions and outcomes have come to the forefront of economic research. We introduce religiosity, measured as the share for which religion is important in daily life, to explain institutional quality in the form of property rights and the rule of law. Previous studies have only measured the impact of membership shares of different religions, with mixed results. We find, in a cross-country regression analysis comprising up to 112 countries, that religiosity is negatively related to our institutional outcome variables. This only holds in democracies (not autocracies), which suggests that religiosity affects the way institutions work through the political process. Individual religions are not related to our measures of institutional quality.

In this paper, we trace the emergence and the evolution of property rights from the Homeric Era (1100–750 BCE) to Classical Greece, based on ancient sources and modern interpretations. Indications of the emergence of property rights are to be found in the writings of eighth century Homer and Hesiod. Property rights evolved, together with changes in warfare and city-states during the Archaic and Classical periods, becoming more secure and specific, based on contracts. We analyse as case studies Themistocles’ Naval Law of 483/2 BCE and Nicophon's Monetary Law of 376/5. We also cover some other aspects of property rights, such as commercial transactions and the enforcement of contracts, official (written) law and legally binding procedures of law enforcement, banking services and the rights of women.

Far from inspiring that paradigmatic shift in economics that was envisioned by its early proponents, ‘evolutionary’ economics today represents a patchwork of unconnected theories and topics. In other disciplines, evolutionary thinking has induced a paradigm shift, resulting from the adoption of the Darwinian paradigm extended by hypotheses about cultural evolution. Concerning economics, however, even a preliminary discourse on the potential of this paradigm for future theorizing remains controversial. The present paper therefore focuses on the methodological implications of the paradigm. It is shown that hitherto unnoticed common ground can be identified underlying the diversity of approaches to evolutionary economics. It rests in the modalities of causal explanations germane to the Darwinian paradigm. Understanding these modalities also makes it possible to distinguish evolutionary from non-evolutionary research irrespective of the specific theories and topics concerned. The argument is illustrated for the exemplary case of institutional economics.

This introduction canvasses broad themes relating to the nexus of innovation and institutions. It first examines the notion of a “new combination” – a core analytical concept in economic theories of innovation and explanations of emergent novelty through bottom-up processes. Following Schumpeter, different theorists have made different claims about the composition and structure of new combinations. Possible constituent elements include factors of production, capital goods, routines, information, ideas, technologies, and property rights. The article then looks synoptically at the institutional dimensions of innovation from alternative perspectives that focus upon different kinds of institutional rules and policy solutions to innovation problems. Neoclassical and evolutionary approaches tend to emphasize specific policy interventions in markets to channel behavior toward particular desired outcomes, whereas institutional and Austrian approaches tend to focus upon general institutional rules (e.g. property and contract) that frame markets and innovation processes. Finally, this article summarizes the papers in the special issue.

Elinor Ostrom was a leader in using multiple methods to perform institutional analysis. In this paper, we discuss how a multi-method approach she pioneered may be used to study the robustness of social–ecological systems. We synthesize lessons learned from a series of studies on small-scale irrigation systems in which we use case-study analysis, experimental methods in laboratory and field settings, and mathematical models. The accumulated insights show the importance of creating institutional arrangements that fit the human ecology within the biophysical constraints of the system. The examples of work based on multiple methods approaches presented here highlight several lessons. For example, experimental work helps us better understand the details of how the ability to maintain trust relationships, low levels of inequality, and low transaction costs of coordination are critical for success. Likewise, the integration of case-study analysis and modeling helps us better understand how systems that can leverage biophysical characteristics to help address challenges of monitoring, sanctioning, and coordination may be able to increase their chances of success.

In Douglass C. North's works on institutional change, his focus shifted from formal institutions and highly rational actors to the links between culture, cognition, and the evolution of institutions. This has led to a corresponding shift in his basic explanation of institutional change: In his earlier works, institutional change is mainly caused by actions of highly rational utility-maximizing political actors. In his later works, the evolution of a society's institutions is above all a function of changes in the dominant belief system. The paper tries to contribute to the obvious task of bringing these two explanations of institutional change together. My synthetic approach rests basically on a Northian framework supplemented with three further elements: firstly, with the idea of the transfer of institutions; secondly, with the concept of functional differentiation; and, thirdly, and decisively, with an understanding of culture as a toolkit, leaving room for interest, choice, and strategic action.

In this paper I advance a model in which institutional innovation is induced by changes in resource endowments, cultural endowments, and technical change. I also introduce the role of advances in social science knowledge as a source of institutional innovation. The sources of institutional innovation are illustrated by changes in land tenure and labor relations in Philippine agriculture, by the transition from command and control to market-based systems of resource management in the United States, and by the development of institutional design principles based on studies of small-scale resource management. In a final section, I elaborate a pattern model that maps the relationships among changes in resource endowments, cultural endowments, technology, and institutions.

Organizational routines coordinate the interactions and use of knowledge within firms. Efficient routines can imply a competitive advantage for a firm, deficient ones a disadvantage. This depends not only on how smoothly the intra-organizational interactions are in fact orchestrated, but also on what goals this orchestration serves: the organizational objectives or the convenience, effort minimization, or other idiosyncratic goals of involved organization members. Since organizational routines represent a case of collective action, the conditions under which organizational routines emerge cannot be neglected. They hinge on cognitive and motivational attitudes of the organization members suggesting an individualistic perspective on organizational routines.

The claim that institutions matter for economic growth and development has so far received a more extensive theoretical treatment than an empirical or methodological one. Basing our approach on a coevolutionary conception of relations between law and the economy, we link theory to method and explore three techniques for analysing legal institutions empirically: ‘leximetric’ measurement of legal rules, time-series econometrics and interview-based fieldwork. We argue that while robust measurement of institutions is possible, quantitative techniques have their limits, and should be combined with fieldwork in a multiple-methods approach.

There is a tight historical connection between endemic labour scarcity and the rise of coercive labour market institutions in former African colonies. This paper explores how European mining companies in the Belgian Congo and Northern Rhodesia secured scarce supplies of African labour, by combining coercive labour recruitment practices with considerable investments in living standards. By reconstructing internationally comparable real wages, we show that copper mine workers lived at barebones subsistence in the 1910s–1920s, but experienced rapid welfare gains from the mid-1920s onwards, to become among the best paid manual labourers in Sub-Saharan Africa from the 1940s onwards. We investigate how labour stabilization programs raised welfare conditions of mining worker families (e.g., medical care, education, housing quality) in the Congo, and why these welfare programs were more hesitantly adopted in Northern Rhodesia. By showing how solutions to labour scarcity varied across space and time, we stress the need for dynamic conceptualizations of colonial institutions, as a counterweight to their oft supposed persistence in the historical economics literature.

Bounded rationality, opportunism, the primacy of markets and the action of economizing are building blocks of Oliver Williamson's Transaction Cost Economics (TCE). As in all intellectual exchanges, Williamson has used a range of argumentative devices to set up and negotiate his basic notions and assumptions with economists. Rhetorical analysis is applied here to study his argumentation in a certain institutional context within economics. Negotiations with the mainstream, with the competence view of the firm and within the New Institutional Economics, for instance, have had an impact on the construction of TCE and are given attention here. Difficult decisions have been made in order to forge ahead with TCE, including whether to uphold some notions (e.g. opportunism) at the cost of leaving others behind (e.g. economics of atmosphere). Rhetorical transactions like this have shaped TCE and its recognition in economics and related areas.

This paper analyses the relationship between informal institutions measured by social trust and the provision of private credit. Research on the trust–finance relationship abounds, although most of it is confined to the micro-level, with far fewer contributions from a wide, cross-country perspective. Considering a sample of 119 economies in the period 1993–2015, results suggest that social trust is an important determinant of private credit, and that its effects are transmitted indirectly via some particular aspects of the quality of economic-judicial institutions. In addition, and contrary to previous findings in related areas, substitutive effects for informal and formal institutions are not found. Therefore, informal institutions can improve the quality of the certain types of formal institutions but they are, per se, unable to replace them in the provision of credit. Accordingly, a solid economic-judicial system becomes essential to guarantee credit transactions.

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.