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A Theory of Endogenous Institutional Change | American Political Science Review | Cambridge Core
This paper asks (a) why and how institutions change, (b) how an institution persists in a changing environment, and (c) how processes that it unleashes lead to its own demise. The paper shows that the game-theoretic notion of self-enforcing equilibrium and the historical institutionalist focus on process are both inadequate to answer these questions. Building on a game-theoretic foundation, but responding to the critique of it by historical institutionalists, the paper introduces the concepts of quasi-parameters and self reinforcement. With these concepts, and building on repeated game theory, a dynamic approach to institutions is offered, one that can account for endogenous change (and stability) of institutions. Contextual accounts of formal governing institutions in early modern Europe and the informal institution of cleavage structure in the contemporary world provide illustrations of the approach.
institutions  evolution  political_economy  economic_history 
22 days ago by rvenkat
Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies on JSTOR
Lacking an appropriate theoretical framework, economists and economic historians have paid little attention to the relations between culture and institutional structure. This limits the ability to address a question that seems to be at the heart of developmental failures: Why do societies fail to adopt the institutional structure of more economically successful ones? This paper integrates game-theoretical and sociological concepts to conduct a comparative historical analysis of the relations between culture and institutional structure. It examines cultural factors that have led two premodern societies--one from the Muslim world and the other from the Latin world--to evolve along distinct trajectories of institutional structure. It indicates the theoretical importance of culture in determining institutional structures, in leading to their path dependence, and in forestalling successful intersociety adoption of institutions. Since the distinct institutional structures found in the late medieval period resemble those differentiating contemporary developing and developed economies, the paper suggests the historical importance of distinct cultures in economic development.
economic_history  anthropology  culture  social_structure  economic_sociology 
22 days ago by rvenkat
How Land Disappeared from Economic Theory - Evonomics
This may help us explain – at least in part – the great ‘productivity puzzle’– that is, why productivity (and related average incomes) been flat-lining, even as ‘wealth’ has been increasing. The puzzle is explained by the fact that the majority of the growth in wealth has come from capital gains rather than increased profits (or savings) derived from productive investment, Savings are at a fifty year low in the UK even as the wealth to income ratio hits record highs.

When the value of land under a house goes up, the total productive capacity of the economy is unchanged or diminished because nothing new has been produced: it merely constitutes an increase in the value of the asset. This may increase the wealth of the landowner and they may choose to spend more or drawn down some of that wealth via home equity withdrawal. But they equally many not. Moreover, the rise in the value of that asset has a corresponding cost: someone else in the economy will have to save more for a deposit or see their rents increase and as a result spend less (or, in the case of the firm, invest less).
economics  historical_revisionism  economic_history  r_vs_g  piketty  productivity  capital_gains  land  real_estate 
5 weeks ago by perich

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