Conflict and Cooperation: Institutional and Behavioral Economics

Conflict and Cooperation: Institutional and Behavioral Economics......Page 5
Contents......Page 7
Foreword......Page 15
Preface......Page 19
1.1. Institutional Analysis......Page 21
1.2. Outline of This Work......Page 24
2.1. Transactions as the Unit of Observation......Page 26
2.1.1. Individuals and institutions......Page 28
2.2.1. Impact analysis......Page 31
2.2.3. Situation, structure, and performance (SSP)......Page 32
2.2.4. Complementary theoretical frameworks: economizing and power......Page 34
2.3. Theory: Variables and Processes......Page 35
2.3.1. Variables......Page 36
2.3.2. Processes (aspects of linked transactions)......Page 40
2.4. Some Implications of the Variables and Processes: Systems Views......Page 44
2.4.3. Theory of the state (legal–economic nexus)......Page 45
2.4.5. The place of institutional economics in policy analysis......Page 46
2.4.6. Conceptual pluralism......Page 47
3.1. Bounded Rationality......Page 48
3.1.1. Limited information processing capacity......Page 49
3.1.2. The modular brain, multiple self, and bounded self-control......Page 52
3.2. Emotions and Evaluation......Page 54
3.3.2. Availability......Page 58
3.3.3. Anchoring......Page 59
3.3.4. Experience over time: evaluation by representative moments......Page 60
3.3.5. Predicting pleasure–pain......Page 61
3.3.7. When a dollar is not a dollar......Page 62
3.3.9. Sunk costs......Page 65
3.3.11. Selfisness and regard......Page 66
3.3.14. Surprise and boredom......Page 67
3.3.15. Framing inputs......Page 68
3.5. Learning......Page 69
3.5.1. Stimulus, behavior, and reinforcement......Page 70
3.5.2. Cues and patterns......Page 72
3.5.3. Belief persistence......Page 74
3.5.4. What’s your pleasure?......Page 75
3.5.5. Preference formation and change......Page 77
3.6. Conclusion......Page 79
4.2. Evolutionary Theory......Page 81
4.3. Uncertainty......Page 82
4.4. Individual and Society......Page 84
4.5. Emergence......Page 87
4.6. Conclusion: Learning and Evolution......Page 88
5.1. Human and Physical Relationships......Page 89
5.2. Administrative, Bargained, and Customary Transactions......Page 93
5.3. Organizations (Firms), Institutions, and Boundaries......Page 94
5.4. Making Rules: The State......Page 99
5.4.2. Informal institutions for making informal institutions......Page 100
5.5.1. Specifying the state as an institutional variable......Page 101
5.5.2. Specifying performance variables......Page 102
5.5.3. Necessity for moral choice......Page 106
5.5.4. Reasonable value......Page 107
5.6. Conclusions......Page 108
6.1. Introduction......Page 110
6.2. Incompatibility......Page 111
6.2.1. Externalities (interdependence)......Page 112
6.2.2. Sustainability......Page 113
6.3. Exclusion Cost......Page 114
6.3.1. Prisoner’s Dilemma and other games......Page 117
6.3.3. Common pool resources......Page 119
6.3.4. Institutional change analysis......Page 120
6.4.1. Cost of another user......Page 121
6.4.2. Policy implications......Page 123
6.4.3. Avoidance and pre-emption costs......Page 125
6.4.4. Cost of another use......Page 126
6.5. Economies of Scale......Page 129
6.6. Circular and Cumulative Causation......Page 132
6.7.1. High and asymmetric information costs......Page 133
6.7.2. Contractual (negotiation) costs......Page 137
6.7.3. Asset specificity......Page 139
6.7.4. Risk and fundamental uncertainty......Page 144
6.7.5. Evolutionary and competence based theory of the firm......Page 148
6.8. Rent and Rent Seeking......Page 151
6.10. Socio-Emotional Goods......Page 153
6.11. Overview......Page 154
7.1.1. Specifying alternative institutions......Page 158
7.2.1. General......Page 159
7.2.2. Prisoner’s Dilemma experiments......Page 160
7.2.3. Transaction costs......Page 162
7.2.4. Social capital: ultimatum and dictator games......Page 165
7.2.5. Summary of factors affecting cooperation......Page 167
7.2.7. Framing......Page 168
7.2.8. Conclusion......Page 169
7.3. Case Studies......Page 170
7.3.1. Mediterranean trade......Page 171
7.3.2. Infrastructure investments......Page 172
7.3.3. Economic development: England and Spain......Page 175
7.3.4. Social capital......Page 176
7.4. Econometrics......Page 177
7.4.1. Social capital......Page 178
7.4.2. Slavery......Page 179
7.4.3. Air pollution......Page 180
7.5. Simulation and Computation......Page 181
8.1. Introduction......Page 183
8.2.1. Privatization......Page 184
8.2.2. Shareholders and managers......Page 185
8.3. Internal Organization of Firms......Page 186
8.4.1. Conflicting claimants......Page 187
8.4.3. Integration......Page 190
8.5. Trading Rules and Market Formats......Page 193
8.6. How Firms Price Products......Page 194
8.8. Communism to Markets......Page 196
8.9. Conclusions......Page 201
9.1. Money Matters......Page 202
9.2. Credit and Coordination: or “The Fable of the Missing Hoe”......Page 203
9.3. Banking and Property Rights......Page 204
9.4. Business Cycles and Capitalist Development......Page 205
9.6. Deficit Finance......Page 207
9.7. The Fed and Cumulative Causation......Page 210
9.8. Financial Capital......Page 211
9.9.1. Money creation in developing countries......Page 215
9.9.3. Macro effects of low wages and globalization......Page 216
9.10. Observations in Conclusion......Page 218
10.1.1. Markets and relative prices......Page 219
10.1.2. Expectations, uncertainty, search, and selection......Page 220
10.1.3. Appropriability and exclusion costs......Page 221
10.1.4. Increasing returns (economies of scale) and standards......Page 223
10.1.6. Dynamic sequence......Page 226
10.1.7. Technological change and firm......Page 227
10.1.8. Organizing the research enterprise......Page 229
10.2. Technology and Institutional Change......Page 230
10.3.1. Capital goods and growth......Page 232
10.4. Concluding Observations......Page 234
11.1.1. Information cost and moral hazard......Page 235
11.1.3. Fairness......Page 237
11.2.1. Ownership of means of production......Page 238
11.2.2. Ownership of borrowing leverage of the .rm......Page 245
11.2.3. Labor institutions under capitalism......Page 246
11.3. Collective Bargaining......Page 247
11.4. Worker Safety, Health, and Hours......Page 248
11.5. Wages, Unemployment, and the Business Cycle......Page 249
11.6. Discrimination......Page 251
11.7. Conclusion......Page 252
12.2. Axiomatic Theory......Page 254
12.2.2. Agenda power......Page 255
12.2.3. Why vote?......Page 256
12.2.4. Voting rules and boundaries......Page 257
12.2.5. Median voter theory......Page 258
12.3. Institutional and Behavioral Theory......Page 259
12.4.1. Representative government......Page 260
12.4.2. Interest group power......Page 262
12.4.3. Growth of government......Page 263
12.4.4. Bureaucracy......Page 266
12.4.5. Elected or appointed......Page 267
12.4.6. Voting rules......Page 269
12.4.7. Majority and plurality systems vs. proportional representation......Page 270
12.4.8. Redistribution......Page 271
12.5.1. Impossibility theory......Page 272
12.5.2. Process vs. substance: Buchanan and Rawls......Page 273
12.5.3. Necessity for moral choice......Page 274
12.6. Concluding Observations......Page 275
13.1. Theories of Institutional Change......Page 277
13.1.1. Functional......Page 278
13.1.2. Power theories and the power elite......Page 280
13.1.4. Social learning, evolution, and emergence......Page 282
13.2. Informal Institutional Change......Page 286
13.2.1. Population, technology, resources, and imagination......Page 292
13.2.2. Conventions......Page 305
13.3.1. Formation of interest group organizations......Page 306
13.3.2. Constitutions, courts, and legislatures......Page 307
13.3.3. Corporate law and organization......Page 309
13.3.4. Industrial stages, classes, and organizations......Page 312
13.3.5. Labor unions......Page 315
13.3.6. Water law......Page 316
13.4.1. Women’s suffrage......Page 318
13.6. Conclusion......Page 319
14. Recapitulation......Page 321
References......Page 323
Index......Page 351