Institutions and the Path the Modern Economy: Lessons from Medieval Trade Avner Greif Index More Information

Cambridge University Press 0521671345 - Institutions and the Path the Modern Economy: Lessons from Medieval Trade Avner Greif Index More information

Index

absolutism, 393, 394 satisficing, 152 Abu Bakr, 253 situationally contingent, 144 accounting system, 85, 204, 300 behavior, micro-foundations of, 16, 125–38 agency relations, 273–4 cognitive, 125 and efficiency, 62 coordinative, 125 honesty in, 65, 66, 68, 75, 215, informational, 125 276 normative, 125, 143–7 intercoalition, 81–3 social, 143–7 inter-economy, 289–94 beliefs, 10–14, 36–7, 133, 139–40 intra-economy, 289–93 admissible set of behavioral, 139 modeling, 429 admissible set of internalized, 140, agents, overseas, 61 141–2 (see also cognitive modes; coordination of, 69 models, mental) alberghi, 175, 245 behavioral, 36–7, 46, 139 al-Mawardi, 150 institutionalized, 30, 34, 36–7, 48, 124 altruism, 144, 422 internalized, 31, 36, 46, 124–8 aman, 101 religious, 202, 431 analogy, 213 subjective, 132 arms race, 173 See also fundamental asymmetry attention, 166 bill of lading, 296–8 auditing, 204 bonuses, and motivation, 438 Austrian Economics, 154 bribes, 322 authority, see cultural, authority; power Bruges, 100, 104, 106–8 business backward induction, 414–16 associations, forms of, 285, 286 and experimental evidence of, 414–20, organization, family relations and, 298 425 See also networks Bacon, Francis, 19, 355 Byzantine Empire, 96 Bank of San Giorgio, see Genoa See also Rums bankruptcy, 325 barriers to entry and exit, see institutions, Caliphate reputation-based Abbasid, 77 behavior, 8, 13–15, 124–38 Fatimid, 61, 294 altruistic, 423 capital consequential, 422 as bond, 283, 284 mimetic, 427 See also civil capital; social capital morally appropriate and socially case-study method, 21, 307, 350–1, 387 accepted, 36, 127, 143–7, 421–2 See also context-specific analysis opportunistic, 62, 273 Catalan merchants, 100 regularities of, 32–3 Champagne fairs, 315, 333–5, 336

489

Index

charity, 280, 432 colonialism, 150, 401 Christianity, rise and influence, 26, 149, commenda, 286 206, 252, 280, 390 commerce/commercial See also legitimacy; Protestantism disputes and community responsibility city-states, Italian, 253 system, 331 civil capital, 382 privileges, 221, 224, 243 clans, 170, 223–4 sanctions, 104 and cooperation, 230, 233, 239 gains, 221 and identity, 234, 245 See also trade Carmadino, 223, 230–2, 237 commitment, institutionalized, 101, 219 della Volta, 239 commitment problem Maneciano, 223, 230–2 in agency relations, 62, 65, 273 See also cleavages in impersonal exchange, 313–14 class, see popolo in interclan relations, 224 cleavages, ethnic and tribal, 250 in revealing identities, 348 coalition, 58–9, 85–7 of rulers, 92, 96, 98–100, 109, and agency relations, 58 110–12 closeness of, 79, 288–93 See also game, one-sided prisoner’s efficiency, 77 dilemma internal information flows, 66 common knowledge, 11, 407 origin, 81, 87, 278–9 and game-theoretic analysis, 126–34 size, 84, 87, 109 and institutionalized rules, 138 and transaction costs, 87 common law, 340 See also institutions, reputation-based commune/communal, 222, 310, 319 code of conduct, 59 affiliation, 59 coercive power courts of, 318–19, 322 balance of, 239–40 identification, 335 economically productive, 401 liability, 346 legal use of, 310 See also communities; community and reputation-based institutions, 311, responsibility system 348, 391 communication, 116 state with, 91 word-of-mouth, 115 See also government, powerful yet communities, 56–7, 59, 71, 84, 310 limited; predator-ruler; transaction intracommunity familiarity, 327 cognitive dissonance, 191–2 reputation, 326 cognitive resources, 196 self-governed, 321, 347 cognitive science, 18, 140 See also clans; commune; ethnic groups; cognitive models (cognitive systems), 11, Maghribi traders 36, 128, 131, 141–2 community responsibility system, 309–10 and direction of institutional change, in contemporary economies, 348 125–6, 188, 190, 191 decline of, 338–45 and micro-foundations of behavior, 125 dynamics of, 346–7 reproduction of, 140 and falsification cost, 340 See also beliefs, internalized; model, historical evidence regarding, 328 mental in Muslim law, 347 collective action, 108, 311, 429 organizational features, 334 collective decision making, 51 origin, 337 collective responsibility, see community and podesteria, 244 responsibility system political viability, 341, 342 collectivism and protection of property rights, 328 and communalism, 276 and suspension, 333 in developing countries, 269 a theory of, 320–8 in Imperial China, 381, 398 and verification cost, 340 in Muslim world, 273, 396 See also commerce/commercial, disputes; See also commune/communal; cultural elite, and institutional change; elite, beliefs; equilibrium; punishment; mercantile; fairs; scribes; social, society, collectivist mobility

490

Index

comparative and historical institutional contextual knowledge, see context-specific analysis, 14–21, 382–8 analysis See also context-specific analysis contextual refinement, 189, 211–12, 362, complementarities, institutional, 197, 207, 387 386 contract comparative statics, see context-specific ambiguities, 98 analysis and authority, 70 competition, and institutional comprehensive, 69, 70, 86 performance, 400–1 enforceability, 85 complexity, computational, 129 and hierarchy, 70 confirmatory bias, and direction of incomplete, 69, 70 institutional change, 191 and negotiation cost, 69, 71 confiscation, see impounding contractual forms, incentives for conjecture developing, 204 confidence in a, 372 convention, 43 developing a, 360–3 cooperation and direct and indirect evidence, 367 and external threat, 233–5, 237, 250–1 evaluating through context-specific interclan, 175–6 model, 366–76 problem of, 429 and historical information, 362, 372–4 and social exchange, 146 about relevant institution, 364 socially beneficial, 4 See also context-specific analysis; See also agency relations, honesty in; econometric analysis of institutions institutions, reputation-based; legal contest success functions, 256 system; norms, internalized; norms, context-specific analysis, 307, 309, 351–2, social; reputation mechanism, 366, 387–8 multilateral and coordinated and comparative statics, 369–70 cooperators, conditional, 424 and context-specific models, 351–2, coordination 364–6, 376 and institutional undermining, 169 and contextual knowledge, 351, 358, and institutional change, 165 360, 376 and micro-foundations of behavior, and contextual refinement, 362 125 and counterfactual analysis, 369 by organization, 93, 116 and deductive theory, 19, 351, 352, 358, effect, 197–8, 205, 210, 386 362–3, 376, 428 failure, 311 and direct evidence, 367 of overseas agents, 69 and equilibrium analysis, 366–9 problem, second-order, 354 and European institutional development, problem, ubiquity of, 125, 129 393 See also behavior, micro-foundations; and exogenous institutional elements, reputation mechanism; rules 361–2 corporations and indirect evidence, 367 in Europe, 26, 389–90, 391, 393 and induction, 19, 305–6, 355–7, 362 modern, 394 initiating, 357–60 in Muslim world, 396 and institutional dynamics as historical and technological change, 395–6 process, 372–4 See also corporatism and insufficiency of deductive theory for, corruption, 6, 344 314–15, 352–5 counterfactual analysis, see context-specific and insufficiency of induction, 355–7 analysis and organizations, and equilibrium set, countries 370–2 developed, and organization of society, and out-of-sample predictions, 374 296 and predictions, 367–9 developing, and organization of society, and transactions, 351, 359, 360 269 See also case-study method; conjecture; developing and collectivism, 269 econometric analysis of institutions; See also development process, in empirical methods developing countries; state

491

Index

courts development process, in developing as part of an institution, 31–2, 51 countries Jewish community, 295 and international assistance, 403 local, in Europe, 318–19 and existing institutions, 403 and partial provision of justice, 318–19 and institutional reform, 402–5 See also legal system best practices, and adoption of, 402 critical moment, in institutional centralized state, in context of, 401 development, 208 community-centered, 401 Crusades, 223, 232 policy aimed at institutional change, 380 cultural beliefs, 269–73, 386, 390–6 power, abuse of, 401 admissible set of, 270 threats, external, 401 collectivist, 278, 281, 300, 301 See also developing countries and economic efficiency, 282, 289, 293, deviations, and institutionalized rules, 142 300–1 dictatorship, preventing, 238, 239, 240, and equilibrium selection, 288 241 individualist, 278, 281, 300 division of labor, institutional foundations and institutional development, 270–3, of, 301 295–300 Durkheim, Emile, 22, 124, 145 and institutions governing agency relations, 276 econometric analysis of institutions, 6, 20, and legal developments, 280, 294–5 306, 367–8 and organization of society, 269–71 macro-level proxies of institutions in and organizational change, 271, econometric analysis, 306 293–300 See also conjecture, confidence in a; origin of distinct, 278–81 context-specific analysis and social relations, 282–6 economic prosperity and social structures, 282–6 and institutions, 3–4, 397–400 and socialization, 270 sources of, 395 and wealth distribution, 286–7 and technologic change, 395–6 culture/cultural, 21 theories of, 358 analysis, 358 elite as tool kit, 23, 188 and institutional change, 238, 338, authority, 148 341–3 and contractual relations, 70 mercantile, 101 determinism, 25 embargo, 97, 98–9, 102, 103–4, 106–8, elements of, 22 121 feudal, 223, 280 breakers, 99, 117 heritage and institutional selection, 279 formal organization of, 296 and organization of society, 269–73 informal organization of, 296 persistence of, 163 emotional responses, 146 of revenge, 244 empirical methods See also custom, as legally binding; social challenges to traditional, 19–21, 350–7, custom, as legally binding, 71 387 for comparative institutional analysis, decisions, interrelatedness of, 410 17, 375 deduction, insufficiency for choosing in social sciences, 20, 305 behavior, 129, 192 See also case-study method; conjecture; See also rationality context-specific analysis; econometric deductive theory of institutions, lack of, analysis of institutions 19, 305, 353 end-game problem, 326, 433 and cognitive models, 354–5 and intergenerational transfers, 86, 435, and fundamental asymmetry, 354 436 and meta-games, 354 and old age, 434 and multiple equilibria, 353–4 organizations and, 346 and norms, 354–5 See also institutions, reputation-based See also context-specific analysis endowment, impact on institutional determinism, see environmental determinism development, 228

492

Index

enforcement evolutionary institutionalism, see in an ethnic groups, 88 institutional dynamics; intrinsic, 143 institutionalism, evolutionary within organization, 93, 94 exchange second-party, 278 anonymous, 301 in social networks, 88 games of, 413 third-party, 278 impersonal, 309–10 See also legal system; motivation impersonal and efficiency gains, England 309–10 and community responsibility systems, impersonal and ostracism, 315 312 impersonal and rise of the state, 314 and Merchants of the Staple, 122 impersonal and spot, 313 entitlements, 181 personal, 309, 311 entrepreneurs, institutional, 201–2 voluntary or involuntary, 46, 429 environmental effect, 196–7, 205, 210, 386 See also commitment, problem; environmental determinism, 25 community responsibility system; equilibrium, 408 game, one-sided prisoner’s dilemma; collectivist, 278 property rights contagious, 321 convergence to, 133 factors, nonphysical, 33, see also social, individualistic, 278 factors in mixed-strategies, 412 fairs, 95 multiplicity of, 19, 353–4, 411 and community responsibility system, Nash, 408, 410–12 335–6, 343 and Pareto efficiency, 414 family firm perfect Bayesian, 331 and community responsibility system, 343 pooling, 432 cultural beliefs, 299 punctuated, 169 feedback, 179 rationalizable, 128 feudalism self-confirming, 142 beliefs and norms associated with, 223, subgame perfect, 416–18 280, 391 equilibrium analysis, 407–20 and process of state formation, 391 and admissible behavioral beliefs, 139 feuds, 245 and internalized beliefs, 140, 141–2 See also revenge, culture of and norms, 145–6 Flanders, and community responsibility and renegotiation, 443 system, 337 and social and normative behavior, Florence, and community responsibility 143–7 system, 312, 330 See also context-specific analysis, and focal points, 165, 271, 279 predictions Folk theorem, 420, 433 ethnic (kin-based) groups See also equilibrium, multiplicity; game, and institutions for repeated contract-enforcement, 88 framing effect, 131, 145, 213, 421 and state formation, 251–5 France European institutional development Estates-General, 395 and bottom-up state formation, 395 and monarchy, 122 and broader context, 400–1 Frederick I Barbarossa, 233 common aspects of, 393 See also Henry VI; Holy Roman Empire and competition, 400–1 free riding, 429 and corporations, 389 functionalism, 354, 359 and individualism, 390, 391, 393 See also institutions and made-man law, 391 fundamental asymmetry, 17, 187–8, and secular legitimacy, 149, 393 189–94, 209, 386 and slavery, 205–7 and behavioral beliefs, 192 particularities of, 396 extent of, 193 and uniformity of interest, 391, implications of, 194–9 400 and norms, 192

493

Index

fundamental asymmetry (cont.) consular system in, 227–32, 234–5, 237, of organizations, 192–3 247 and rules, 191–2 consuls, 222 Fustat (old Cairo), 60 institutional foundations, 220 and its merchants, 272, 273 game See also clans; podesta´; podesteria action set in, 407 geography, impact on institutional deﬁnition of a, 407 development, 228 dictator, 144, 423–4 Germany, see Holy Roman Empire driving, 410–11 gestures, 199 dynamic, 412 gossip and reputation, 439 in extensive form, 412 government, powerful yet limited, 219, 220 gift exchange, 425, 426 See also predator-ruler; state inﬁnite horizon, 416 grain of truth, 133 linkage among, 370 guild, craft, 93 matching pennies, 411–12 guild, merchant meta, 11 cartel theory of, 94, 121, 122 modeling exchange relationships as, 413 evolution of, 105, 109 in normal (matrix) form, 412 institution of, 94, 95, 101, 120, 122 one-sided prisoner’s dilemma, 110, 310, leadership of, 101 413–14, 429 and monopoly rights, 104–5, 121 payoff set in, 407 organizations of, 92, 93–4, 101–2, 109, perfect information, 416 116, 120 players’ set in, 407 See also Hansa; Kontor presenting situation as a, 141 guilt and reputation, 431 prisoners’ dilemma, 409, 429 public good, 425 habit, see institutional persistence and repeated, 418–20 stability rules of the, 407 Hansa (and Hanseatic League), 105–8, simultaneous moves, 416 109, 122, 137, 195 stage, 418 and community responsibility system, 330 static, 408 Diet of, 107 and subgame, 418 Hayek, Friedrich A. von, 42, 389 of trust, 413 Henry VI, 237 ultimatum, 422, 425 See also Frederick I Barbarossa; Holy See also end-game problem; equilibrium; Roman Empire Folk theorem; intertransactional heterogeneity, social and economic, 341 linkages See also institutional change game theory history classical, 18–19, 138, 151 institutions as engines of, 379–80, classical, and institutional analysis, 9–11 399–400 evolutionary (see institutional dynamics; theory of, 156 institutionalism) Holy Roman Empire, 222, 243 experimental, 18, 143, 422 and community responsibility system, inductive and subjective, 137–40, 142 337 learning, 18, 129 and its towns, 103–4, 109 psychological, 146 See also Frederick I Barbarossa; Henry unrealistic assumptions of classical, VI 124–5, 129 Homans, George, C., 143 usefulness of, 18–19 homo sociologicus, 421 See also equilibrium; Folk theorem honesty, see agency relations geniza,60 human nature, 42 Genoa, 170, 172–5, 217, 243 agency relations in, 274 identities Bank of San Giorgio, 246, 249 communal, 310, 327–8 and community responsibility system, development of, 45, 152 330 formation in Muslim world, 253

494

Index

personal, 310, 327–8 innovations and direction of institutional and reputation-based institutions, 348, change, 203–5, 273 432 life cycle, 180–2 See also clans; institutional revolution of late medieval, 399 reinforcement; norms; social selection and past institutional elements, considerations 385 ideologies, see beliefs, internalized; support, 164, 384 institutional reinforcement transition, and voice, 344 ignorance, 134 institutional change impounding, 329, 332 and contextual refinement, 189 incentives, see motivation and coordination, 165 inclusion effect, 198–9, 205, 210, 386 cost of, 190, 205, 207, 386 Indian Ocean, 78 and critical moments, 208 individualism endogenous, 158, 159–61, 167–8, 271, and Christian theology, 280 385 and cultural beliefs, 278, 281, 300 and heterogeneity of interest, 341 and decline of kin-based organizations, and institutions, 380–1 252 and legitimacy, 200 in developed countries, 269 mechanism of, 168–70 and European institutional development, nature of, 208 26, 390, 393 of merchant guild, 105 excessive, 26 and oligarchies, 343 and rise of formal, non-kin-based and power, 35, 36, 200 organizations, 391 to serve function or interest, 381, 398 Western, 279–81 See also institutional persistence and See also equilibrium; society stability induction, see context-specific analysis institutional change, direction of inequality aversion, 144, 424 and cognitive models, 36, 188, 190, 192 information and confirmatory bias, 191 aggregation, 134–5 endowment and, 228 asymmetric among various merchants, and environmental factor, 379 98 forces influencing, 13, 187–9, 194–203, asymmetric, among merchants and 380–1 agents, 85 geography and, 228 cost, 83 and innovations, 203–5, 273 endogenous to institution, 445 and institutional entrepreneur, 201–2 flows, 64 and interests, 381, 398 imperfect, 105 and knowledge of, 203 incomplete, 142, 277, 426 and leadership, 199–202 and micro-foundations of behavior, 125 and memory, 188, 190 private, 133–4 and micro-foundation of behavior, 190 public, 326 and preference, 188, 190 trade-related, 64 See also fundamental asymmetry; transmission in late medieval period, 101 institutional complex; institutional innovations elements; institutional refinement institutional, 203–5, 273 institutional dynamics, 10, 153–5 organizational and contractual, 204, 299 as historical process, 15, 16–17, 155–6, institution/institutional 188 complementarities, 197, 207 evolutionary perspective, 153–5, 187 complexes, 205–9, 210, 387 and institutions-as-rules, 9 crisis, 195 in evolutionary institutionalism, 11–12 decline, 338 in game-theoretic approach, 11 development, 402 intentionally created perspective, 153–4, entrepreneurs, 201–2 187 features, exogenous and endogenous, reflecting cultural and social heritage, 360–2 272–3, 380–1 hierarchy, 34 sociological approach, 188

495

Index

institutional dynamics (cont.) of Genoa’s political institutions, 234–5, transaction costs of change, 386 244–6 and unintended consequences, 219–20 institutionalism institutional elements, 14, 30, 383 evolutionary, 11–12, 19, 23, 154 content of, 190–1 historical, 23, 161, 208 coordination effect of past, 197–8, 205, neoinstitutionalism, in economics, 7 210 neoinstitutionalism, in social sciences, 7 environmental effect of past, 196–7, 205, old, 11–12, 154 210 sociological, 22, 41 historical origins, 372 See also perspectives on institutions inclusion effect of past, 198–9, 205, 210 institutionalization, 136, 148 observable, implications for institutional institutionalized rules analysis, 356–7 See rules roles of, 35–7, 383 institutions, 12–13, 30, 39, 40, 151, 382 unobservable, implications for as cultural phenomena, 21 institutional analysis, 355–6 as determined by function, 42–3, 381 See also institutional refinement as rules, 7–8, 18, 22, 24, 39, 51, 195 institutional persistence and stability, as rules and institutional dynamics, 9 158–9, 161–6, 384 as system, 14–15, 35–37 and attention, 166 classifying, 355 and cognitive resources, 166 combining (legal) coercion and and coordination, 165 reputation, 311, 348 and habit, 166 and cultural and social world, 269–71, and knowledge, 164 272–3, 380 and playing against rules, 164, 182 effectiveness, 400 and routines, 166 endogenous, 15, 53 See also institutional change; as equilibria, 14, 19 institutional dynamics; institutional and European modern economy, 393 reinforcement an example of, 30–2 institutional refinement, 194, 386 functions of, 42, 43–4, 153 and direction of institutional change, indeterminacy of, 19, 305–6, 350–5 195–6, 209 influence of past on processes leading to, failed, 239 187–9, 209 institutional reform, 402–5 informal, 9, 269, 382 institutional reinforcement, 17, 159, inherent indeterminacy and 167–70, 177–81, 207 context-specificity, 305 and entitlements, 181 and institutionalized way to reach new and identities, 181 institutions, 199 and ideologies, 181 integrative concept of, 15, 40–4 intentional, 169 and interests, 7, 40–2, 194, 199–203, and norms, 181 381, 398 and self-image, 181 law-based, 311 speed of, 184 legitimacy and origin, 147–50 See also institutional change, direction measures of efficiency, 4, 300–1, 397–8 of; institutional undermining; and micro-foundations of behavior, 384 institutions, self-reinforcing as monolithic entity, 14 institutional trajectories multitiered, 347 distinct, 209, 273 mutually reinforcing, 207 European, 396 optimal, 87–8 influence of past on, 209–11 origin, 127, 147, 188–9, 218, 269–73, See also European institutional 380–2 development; institutional change political, 7, 171, 343–4 institutional undermining, 17, 179–80, private-order, 8, 428 181–2, 385 and prosperity, 3–4 coordinated, 169 reinforcing, 385 of community responsibility system, reproducing, 384 338–42 role in achieving deterrence, 137

496

Index

self-enforcing, 15, 53, 384 Iran, 102 self-enforcing political institutions, 237 Islam, emergence, 206 self-reinforcing, 167–70 See also Muslim society socially beneficial, 4 Italy transition of, 237 and community responsibility system, uncoordinated processes leading to, 330, 337 203 Italian cities, 108 undermining, 385 See also institutional; private-order; jurisdictional boundaries, 309 perspectives on institutions justice, impartial, 310, 326 institutions, reputation-based, 58–9, 66, See also legal system, partial 75, 181, 428–51 and barriers to entry and exit, 79, 292, knowledge 319, 437–40 (see also embargo, and institutional persistence and change, breakers) 164, 203 and building relationships, 438 and institutionalized rules, 16–17, 133, and charity, 432 138, 140 and complete information, 432 and internalized beliefs, 36 cost of, 311, 450 contextual, 351, 358, 360, 376 gains from, 79 encapsulated, 199 and gossip, 439 See also behavior, cognitive and guilt, 431 micro-foundations of; cognitive and identities, 327–8, 348, 435, 445 models; common knowledge; and incomplete information, 430, 432 rationality and legal system, 295 Kontor, 100, 105–8, 109 and problem of finite life-span, 73, 321 See also Hansa See also end-game problem institutions, static and dynamic efficiency labor unions, 51 of, 398 late medieval period, 23 and anonymous exchange, 301 law/legal and division of labor, 301 divine (see Shari’a) in individualistic and collectivist and European institutional development, societies, 282, 293, 300–1, 398 391–5 and impersonal exchange, 309–10 Germanic, 337 and intentional institutional creation, 398 man-made, 149, 347 and social pressure, 301, 398 personal, 334, 340 and the state, 393 responsibility of collectives (see and technological changes, 395–6 community responsibility system) See also societies, integrated; societies, responsibility of individuals, 312, 338, segregated 349 interest Roman, 337 groups, 51 sanction, 31 materialistic, 147 territorial, 312, 334, 340 uniformity of, 400 See also court; custom, as legally See also institutions and interests; binding; legal system; legal traditions; institutional change, direction of merchants’ law; motivation international trade, 312 law merchant and impersonal exchange, birth of, 312, 345 314, 316 and development of domestic institution, See also merchants’ law 312, 347–8 leadership, see institutional change, and growth, 221, 312 direction of; institutional See also trade entrepreneurs intertransactional linkages, 47–50, 52, learning, 129–30, 132, 169, 329 145, 147, 383 institutional, 203, 238, 242 and contract enforcement, 59 local, 237 and organizations, 49–51 models of, 12, 422 See also transactions See also game theory

497

Index

legal system See also law merchant and impersonal complementarity with reputation-based exchange institutions, 295 military cost of, 301, 311 in Africa, 250 difficulty in establishing, 311 strength, link between wealth and, 236 impartial, 314 threats, external, and internal partial, 346 cooperation, 233–5, 237, 250–1 relations to cultural beliefs, 280, 294–5 See also coercive power relations to political institutions, 343–4 model supporting impersonal exchange, 311, complete and closed, 124–8 343–5 context-specific, 387 See also law/legal; Shari’a mental, 128 legal traditions See also cognitive models Muslim (see Shari’a) modeling Roman and Germanic, 391 ad hoc, 365 See also law/legal; legal system context-specific, 351–2, 364–6, 376 legitimacy, 127, 395 limitations of, 365 and democratic state, 149 monarchy faith-based, 150 elected, 176 and institutional change, 200 constitutional, 395 and origin of institutions, 147–50 monitoring, 83, 86, 448 and participatory professional by organizations, 93 associations, 150 imperfect, and agency relations, 65, 73, secular, 149, 393 278 logic imperfect, and community responsibility of appropriateness, 136 system, 331 instrumental, 136 perfect, 278 London, 328, 341 moral hazard problem, 430, 432 mayor of, 329, 330, 345 moral propensities, 272 motivation (incentives), 7, 8–9, 30, 36–7, Maghribi traders, 60, 61, 77, 109, 138, 136, 143 141, 272 based on pecuniary reward, 45 origin of collectivism among, 279 and beliefs and norms, 36–7, 45–50 Maimonides (Moshe ben Maimon), 71 endogenous, 7–12, 15–16 market in evolutionary institutionalism, 12 institutional foundations of, 3, 55–6, 88, in game-theoretic approach, 9–11 301 in institutions-as-rules approach, 8 integration, 88 intrinsic, 127, 272 precondition for rise of, 347 psychological, 152 as primitive, 55 social and normative, 143–7 for stock, 299 See also enforcement; norms; See also property rights institutional elements, roles of market prices Muhammad, 202 as institutionalized rule, 134 Muslim law and collective responsibility, and institutions, 30 347 meaning(s), 137–40, 199 See also Shari’a Mecca, 202 Muslim society, 396 memory, and direction of institutional corporations in, 396 change, 188, 190 emergence, 206 mercantilism in Europe, 393, 394 faith-based legitimacy in, 150 merchant guilds, see guild, merchant and institutional complexes, 397 Merchant Adventurers, 122 kin-based organizations in, 253–5, merchants’ law, 59, 70–1, 86 396 adjustments in, 71 security to foreigners, 101 and flexibility in agency relations, 71 slavery, 205–7 and negotiation cost, 69, 71 and the state, 396–7

498

Index

See also collectivism; Muslim law and dual nature, 31–2, 50–2, 384–96 collective responsibility; Shari’a; formal, 100 society, collectivist and fundamental asymmetry of, mustarbin, 279 192–93 mutual deterrence, 172 institutional refinement by establishing equilibrium, 225, 247, 248, 258 new, 271 a model of, 224–7 interest-based and self-governed, 389 and intertransactional linkages, 49–50 nations, 100, 106, 312 kin-based, 251–5, 390, 396 neoclassical economics, 352 monitoring by, 93 networks non-kin-based, 26 business, 59 roles of, 37, 48 for information transmission, 59, 66, 81, self-enforcing, 174 83, 277 self-governed, 26 social, 88, 272, 281 undermining of kin-based organizations See also patronage networks by the church, 252 norms See also enforcement; social structure internalized, 30, 34, 37, 46, 143, 145 Ottoman Empire, 397 internalized and fundamental ownership and control, separation asymmetry, 192 between, 204 internalized and micro-foundations of behavior, 125, 143–7 parametric (unexpected) change, 168–9, internalized and superego, 143, 145 180, 232 role of internalized norms, 48 parliament, 51 social, 59, 148 in England, 344, 395 See also institutional reinforcement in Genoa, 222–7 North Africa, 100 and representative organizations, 395 Norway, 107 See also France, Estates-General; Venice, Great Council Ockham’s razor, 365 Parsons, Talcott, 22, 39, 42, 143, 426 See also conjecture; standard of proof partnerships, 285–6 oligarchies, see elite path dependence, 23 opportunistic behavior, 62, 273 in societal organizations, 273 optimization, case-based, 212 institutional, 158 order, private, see private order patronage networks, 175 organizational payoffs, endogenous, in reputation-based capacity/learning, 193, 200–1 institutions, 437–40 change, 107–10, 169, 180, 204–5, 271, See also institutions, reputation-based 293–300, 336–7 peace and prosperity, 225, 249 structure, 108 See also politics/political, violence and theory, 51 prosperity organization of society perspectives on institutions and collective enforcement, 272 agency, 12, 14, 40–2, 188 and culture, 269–71, 272–3 economic, 39–43 (see also institutions, definition of, 269 as-rules) distinct forms of, 269 evolutionary, 153–5, 187 efficiency of distinct, 293, 300–1 functionalist and interest-based, 13, 381 and impact on moral and social historical process, 15, 16–17, 155–6, enforcement, 272 188 and intrinsic motivation, 272 intentionally created, 153–4, 187 origin of distinct, 269–71, 278–81, 300 sociological, 188 origin of European, 26, 384–91, 396 structural, 12, 14, 40–2, 188 See also society See also institutionalism organizations (social structures), 30 piracy, 221, 234 change, 204–5 Pisa, 227–8, 243 coordination by, 93, 116 podesta´, 174–5, 237, 238

499

Index

podesteria, 200–1, 237–40, 243, 248, 263, security of, 6 265, 306 theory, 358 self-undermining of, 244–6 See also commitment problem, of rulers; See also government, powerful but community responsibility system; limited government, powerful yet limited; policies merchant guilds aimed at institutional change, 380 Protestantism, 396 as function of institutions, 229, 345, 402 See also Christianity, rise and influence welfare enhancing and institutions, 401 punishment, 8 politics/political bilateral, 79–80 economy, theories of, 358 collective, 66, 69, 72, 73, 75, 92–3, 272, institutions, 7, 171, 343–4 281 order, 238 credibility of multilateral, 441 order as an equilibrium outcome, 239 multilateral (third party), 75–7, 442 organizations, self-enforcing, 248 physical, 45 patronage, 229, 242, 245 second-order, 442 science, 12, 18, 23, 39–43, 161, 353 See also legal system; motivation; self-enforcing political institutions, 237 reputation mechanism viability of institutions, 341, 342 violence and prosperity, 217, 246, 249 quasi-parameters, 159, 167, 178, 385 polity See also institutional reinforcement; as equilibrium (self-enforcing) outcome, institutional undermining 217, 232 institutional foundations of, 3 rational decisions, 134 popolo, 175, 243, 285, 287 rationality, 11, 421, 426 power and altruistic behavior, 423 and institutional change, 35, 36, 200 insufficiency for making choices, 127, See also coercive power; culture/cultural; 129 institutional hierarchy; legitimacy reciprocation, 64, 144, 426 predator-ruler, 217 reinforcing processes, 17 preferences See institutional, reinforcement difficulty in predicting future, 421 religious minority, 288 and direction of institutional change, renegotiation, see equilibrium analysis 188, 190 representative organizations, see generalized axiom of revealed parliament preferences, 423 republic/republican models of, 363 aristocratic, 247 ordering, 422 magistracy, 176 social and rationality, 423 movement, 395 stable, 425 See also city-states, Italian See also norms reputation private order, 8–9, 10 building up, 425 and institutions, 8, 428 collective, 310 and late medieval commercial expansion, a definition of, 430 388 and gossip, 439 See also spontaneous order and guilt, 431 process, participatory, 149 and identities, 348, 432 promises, 415 of community as bond, 326 propensities of firm, 436 genetic, 33 and social exchange, 430 normative, 127 reputation mechanism social, 127 bilateral, 65, 92, 96, 112–14 property rights, 6, 95 gains from, 79 abuse of, 91, 402 multilateral, 59, 66, 92, 97–100, 215 protection of, 123 multilateral and coordinated, 115–20 protection as private good, 123 multilateral and uncoordinated, 114–15 protection as public good, 123 See also institutions, reputation-based

500

Index

resources mobilization, 172, 219 situations retaliation and community responsibility new, 187, 385 system, 332, 333 semi-institutionalized, 142 revenge, culture of, 244 strategic, 407 See also feuds Smith, Adam, 55 role models, 45 social Roman Empire, 206 capabilities, 382 routines, see institutional persistence and capital, 22, 25, 382 stability characteristics, 271 rule of law, 6, 123 contract, 222 ruler, and enforcement, 343 control, 214 rule followers, 136 esteem, 143 ruler-merchant relations, 92 exchange, 143, 145, 146, 213 rulers’ commitment problem, see factors, 30, 382 commitment problem; state identity, 32, 59, 78, 79, 84, rules 87 behavioral, 131 identity and immigration, 83 cognitive role of, 138, 140 infrastructure, 382 coordinative role of, 138 considerations and micro-foundations of and credibility of collective punishment, behavior, 143–7 137 mobility and community responsibility, formal, 133 340 and fundamental asymmetry, 191–2 order, 124 informational role of, 138 physiology, 144, 152 institutionalized, 30, 34, 36, 126–7, position, 32, 52, 136 134–8, 141, 148, 150–1, 383 preferences, 144–5 institutionalized, reproduction of, pressure, 301 139–40 prestige, 256 legal, 356–7 propensities, 272 noninstitutionalized, 31 responses, 143 of the road, as part of institution, 37 sanctions, 45 playing against, 16–17, 133 status, 143, 144–5 social, 125, 130–1, 133, 139, 148, 150–1 ties, 279 See also deviations, role in reproducing units, 46 institutionalized rules; institutional units and reputation-based institutions, persistence and stability 435 Rums (Byzantines), 78 values, 147 See also Byzantine Empire See also norms; rules social structure satisﬁcing, see behavior horizontal, 282–6 scribes and community responsibility integrated, 269 system, 334 segregated, 269 script, 131 vertical, 282–6 security agreements, 100–1 See also organizations; cultural beliefs; See also context-speciﬁc analysis rules segregation, see societies, segregated socialization, 45, 46, 130, 181, self-images, see institutional reinforcement 211 self-reliance, 269 and cultural beliefs, 270 shares, in businesses, 299 socializing agents, 130 Shari’a, 149–50, 206–7 societal organization, see organization of See also legal traditions society; societies signal, public and reputation-based societies institutions, 134–5, 432 examples of, 381 signs, 52 integrated, 288–93 Simon, Herbert, 151, 196 kin-based, 390 situationally contingent behavior, see segregated, 288–93 behavior See also society

501

Index

society, individualistic 269, 276, 289–93, constraining coercive power of the, 91 294 contracting on a, 221 and class development, 285 coordinating, 219, 220, 232 and development of contractual forms, effective, 250 296–8 Hobbesian perspective on formation, and information networks, 277 218 and integrated social structure, 288–93 and late medieval commercial expansion, and legal development, 280, 294–5 388 and organizational development, in Muslim world, 396–7 295–300 simple economic view of, 91 relative efficiency of, 293 See also government; predator-ruler; and responses in new situations, 276 state building and social structure, 269 state building, 217, 250–1 vertical social structure, 282–6 bottom-up formation in Europe, 395 wealth distribution, 286–7 See also predator-ruler; state See also equilibrium, individualistic; stock markets, 299 individualism; social structure, strangers, trading with, 327 integrated See also community responsibility society, collectivist, 269, 276, 289–93, system; exchange, impersonal 294 strategies and capital as bond, 283 dominant, 409 and class development, 285 mixed, 412 and collectivist response, 276 pure, 407, 412 characteristics of, 269, 293–4 unimprovable, 414–20 and development of contractual forms, See also equilibrium analysis; game 296–8 theory ease of coordinating collective action, structure-induced equilibria, 10 294 surnames, 327 endogenous barriers to exit from, 292 symbols, 52, 199 and endogenous information networks, 277 Tabriz, 102 and horizontal social structures, 282–6 technological change, cultural beliefs and and legal development, 280, 294–5 corporations, 395–6 and organizational development, theocracy, 390 295–300 threat origin, 279, 293–4 credible, 415, 419, 440 relative efficiency of, 293 external, 173 and segregated social structures, trade 288–93 expansion and institutions, 24 segregation in, 288–93 gains from, 95, 109, 221 and wealth distribution, 286–7 privileged, 221–2, 227 See also countries; collectivism uncertainty, 61 socioeconomic perspective, 22 See also commerce/commercial, sociology, 12, 14, 18, 39–3, 136, 353 privileges; international trade See also Durkheim, Emile; homo transaction, 45–7 sociologicus; institutional dynamics; auxiliary, 47, 48, 383 institutionalism; Weber, Max central, 47, 49–50, 383, 428 sovereign’s debt problem, 347 coercive, 93, 99, 120 spontaneous order, 389 costs, 51 See also institutionalism, evolutionary; credit, 320 private order and external effects, 45 standard of proof, 194 information-sharing, 59, 93, 99, 120 See also conjecture; Ockham’s razor and institutional analysis, 17, 45–50 state merchant-agent, 58, 272 absolutist, 390 potential, 47 bottom-up formation, in Europe, 395 ruler-merchant, 93 centered institutions, and efficiency, 393 variety of, 46

502

Index

See also context-speciﬁc analysis; doge, 175–7 intertransactional linkages Great Council of, 176 transaction cost economics, 7, 15, 18, 45, Verhansung, 107 358 violence, see coercive power; political order tribes Arab, 253 and social divisions, 255 war trust, 6, 25, 59, 63, 86 civil, 246 Tunisia, 61, 77 civil wars, in Genoa, 173, 236 Hundred Years’ War, 343 ulama, 150 World War II, 401 umma, 279 wealth See also identities distribution and cultural beliefs, 285, utility 286–7 function, belief-dependent, 259 distribution and institutional change, 341 transferable, 443 and military strength, 236 Weber, Max, 22, 39, 41, 395–6 Venice, 170, 175–7, 243 See also Protestantism and community responsibility system, West, Rise of the, 24, 25–7, 398–9 330 Westminster, Statute of, 344

503