The relationship between firms’ owners and managers is a quintessential example of costly principal–agent interaction. Optimal design of monetary incentives and supervision mechanisms are the two traditional ways of reducing agency costs in this relationship. In this paper, we show evidence which is consistent with a third mechanism: firms have managers whose economic preferences are aligned with owners' interests. We uncover differences in economic preferences between managers employed in firms controlled by two distinct classes of ‘patrons’: employee-owned firms (worker cooperatives) and conventional investor-owned firms. In a high-stakes lab-in-the-field experiment, we find that co-op managers are less risk-loving and more altruistic than their conventional counterparts. We do not observe differences between the two groups in terms of time preferences, reciprocity, and trust. Our findings are consistent with existing evidence on worker cooperatives, such as their tendency to self-select into less risky industries and their compressed compensation structures.

We present an experiment that sets up a context of production of a common output obtained by using production means that are randomly and unequally distributed. Before the production phase, subjects must choose a distributive principle for the output division, under ignorance of the allocation of the production means. Subsequently, they make a distributive choice fully aware of their luck and performance. The aim of the experiment is to test, first, whether ordinary subjects in an impartial situation are capable of converging on a fair principle of distribution – able of redressing the arbitrariness of the initial production means allocation; and second, whether these same ordinary subjects are capable of actually following that principle in a real distributive choice that excludes coercion, reputation effects and other forms of social pressures. The main finding is that a distributive rule that redresses initial inequalities is both accepted ex-ante and actually applied ex-post by most individuals. Our conclusion is relevant for the issue of realism of normative theories of justice and the possibility of institution design aimed at implementing distributive justice principles and policies.

The literature on collective action has poorly addressed processes of incremental institutional changes within organizations. This paper helps fill this gap by shedding light on how the community-based management of an organic label has changed following its formal recognition as a ‘participatory guarantee system’ (PGS). Ostrom and Basurto's (2011) analytical tool is useful to describe the changes in collective rules to address collective action problems that take place in standard-setting and labeling activities. Using original data collected from the Ecovida Agroecology Network – the oldest and largest PGS in Brazil –, we study the multi-scale changes in governance rules from the 1970s until today. We pay particular attention to the links between the institutional consolidation of PGS, its recognition by public authorities, and its adaptation to legal rules. We detail analytical operators indicating whether the introduction of the PGS rules at the national level was bottom-up or top-down. Our findings emphasize how local communities have been able to both adapt their governance system in response to the official arrangements concerning organic regulations, and influence national public arenas where these arrangements are defined. This form of co-management has been accompanied by a significant increase in the number of PGS-certified farmers.

Widespread municipal defaults in the late 19th century prompted U.S. states to pass laws restricting the amount of debt cities could incur. These restrictions generally did not bind until the 1920s, when suburban growth spurred local governments to invest in infrastructure, most of which was financed by bonds. We study the relationship between several major debt restrictions – debt limits, supermajority voting referenda, and debt exceptions – and municipal indebtedness in the Roaring Twenties. We find that cities that faced more restrictive debt rules were less indebted by 1929. We also find that debt limits reduced the amount of capital spending in cities during the 1920s and 1930s, while stricter voting rules reduced the likelihood of municipal default in the 1930s. These rules thus determined not only the degree of debt accumulation in early 20th century cities, but also their infrastructure investment and financial health.

Pablo Paniagua and Veeshan Rayamajhee (2021) propose an Ostromian polycentric view on coronavirus disease-2019 (COVID-19) preventative measures co-produced by the state and citizens. I argue that we should also use another Ostromian approach – ‘crafting of institutions.’ Focusing on the crafting of cognitive institutions allows us to understand the co-production of virus containment in all its complexity. Combining the ‘crafting cognitive institutions’ and ‘boosting’ approaches will allow for the creation of institutionally and behaviorally informed anti-COVID policy interventions in line with polycentric pandemic governance.

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.

Extracts from an important article by the American psychologist, philosopher and social scientist Donald T. Campbell are reproduced here, with an introduction underlining the importance of his argument for today. Campbell identified disciplinary boundaries as enablers of specialization but often barriers to scientific innovation and shared knowledge. But instead of unbounded interdisciplinarity, Campbell argued for focused specialisms that cross disciplinary boundaries. This argument is particularly relevant for the development of institutional research in the future.

With its eighteenth annual volume, the Journal of Institutional Economics (JOIE) has come of age. This editorial report looks at the growth of the journal, summarises some of its achievements, reviews progress in addressing diversity and gender balance, outlines current editorial policy, and considers some further issues that are important for the future.