This paper reveals a novel and perhaps surprising ingredient in the mix of influences that inspired and informed the work of Elinor and Vincent Ostrom on self-governance: cybernetics, understood as a theory of control via feedback mechanisms. Based on this crucial insight, the paper portrays self-governance as involving an architecture of multiple levels of so-called ‘second order’ feedback mechanisms. Such compounded systems of organization are the key to understanding any self-governance process and the paper argues that their intrinsic logic provides a critical link between the work of the Ostroms and the public choice and constitutional political economy perspectives on institutional order. The paper thereby offers both a fresh perspective on the Ostromian view of self-governance and also of also of governance theory in general.

This empirical study extends the public choice literature on the allocation of death during war by examining the political economy of foreign fighter deaths in the Russo-Ukrainian War since the 24 February 2022 invasion. The study explores the roles played by various demographic factors, military institutions, and international trade relations in determining the number of foreign fighters from a variety of countries who have died in support of either Ukraine or Russia during the Russo-Ukrainian War. Unlike other related studies, this study also investigates the importance of, and finds evidence in support of, both economic freedom and a robust democracy in shaping the choices made by individuals around the globe to venture to, and die fighting on, the battlefields of Ukraine.

Technology is a complex adaptive system that is both shaped by, and shapes, institutional arrangements. This critical insight, developed in depth by W. Brian Arthur – the father of complexity economics – is relevant to researchers interested in institutions. Arthur provides a method for capturing the underlying dynamics. He offers conceptual tools centred on the concept of increasing returns to make sense of some crucial challenges. He also suggests technical tools, including agent-based modelling, to tackle ill-defined economic, legal, and institutional problems. This article explores his body of work and derives some institutional insights from it.

This paper explores the role of artificial intelligence (AI) within economic institutions, focusing on bounded rationality as understood by Herbert Simon. Artificial Intelligence can do many things in the economy, such as increasing productivity, enhancing innovation, creating new sectors and jobs, and improving living standards. One of the ways that AI can disrupt the economy is by reducing the problem of bounded rationality. AI can help overcome this problem by processing large amounts of data, finding patterns and insights, and making predictions and recommendations. This insight raises the question: can AI overcome planning problems – could it be that central planning is now a viable option for economic organisation? This paper argues that AI does not make central planning viable at either the nation-state level or the firm level, simply because AI cannot resolve the knowledge problem as described by Ludwig von Mises and Friedrich Hayek.

Recent work has argued for a Hayekian behavioural economics, which combines Austrian economics with behavioural economics as developed by Kahneman, Thaler, Sunstein, and others. We suggest that this hybrid is misguided because it relies on individual cognitivism. This view of cognition is incompatible with the Hayekian view of cognition which treats rationality as an emergent phenomenon of social interaction in an institutional environment. This Hayekian view, which we call epistemic institutionalism, is compatible with an alternative prominent perspective in psychology, that of the extended mind, sometimes known as 4E cognition. We demonstrate how the Hayekian perspective on individualism, the price system, and the evolution of rules can be connected to the extended mind programme, through concepts such as the coupling of the individual and their environment, cognitive off-loading, and affordances. We suggest that this alternative combination of Austrian economics and psychology provides a more fruitful way forward, especially because it foregrounds the processes of learning, error-correction, and institutional orders, rather than choice, bias, and individual rationality. To explain why Austrian economists have been receptive to behavioural economics, we distinguish epistemic institutionalism from the (radical) subjectivist approach, which shares key assumptions of individual cognitivism.

Is ‘individualism’ pure selfishness? The climate change literature often assumes so. However, individualism can be seen as capturing values aligned with self-determination and self-achievement but also universalism. Indeed, cultural psychology recognises individualism as reflecting both personal agency and one's embeddedness, not in narrowly defined in-groups, but in society broadly. Through this lens, individualism can be consistent with adopting pro-social behaviours, including climate-friendly behaviours. But the under-exploration of the concept means empirical evidence is limited. Using cross-country, cross-sectional data we find that individualistic values are associated with an increased willingness to take individual-level actions against climate change. Individualism is also not associated with less support for additional taxes levied to fight climate change, and those willing to take more individual level actions against climate change are also more supportive of additional climate change taxes. Overall, our results confirm that individualism can be associated with taking actions for the greater good.

The Economic Freedom of the World report measures five dimensions of economic freedom, one of them being Sound Money. Compared to where it had been in decades for most of the West, inflation skyrocketed in 2021. Yet the indicator which measures inflation in the most recent year barely budged due to how it is specified and parameterized. This paper explores potential improvements on the methodology, although ultimately only modest improvements are achieved over simply changing the value of inflation that corresponds to zero (the lowest index score) in the simplest linear specification.

This paper highlights scholarly neglect of political legitimacy, the idea of a state's use of power in ways acceptable to its citizens. We argue that political legitimacy affects a state's ability to formulate and implement its policies, thus affecting governance. Our paper provides the first empirical evidence of the positive relationship between political legitimacy and governance. We combine novel cross-sectional data on political legitimacy and several governance indicators from 66 countries. Our results show that a one-standard-deviation increase in the legitimacy score increases the rule of law indicator by about one-third standard deviation. These results are robust across OLS, an instrumental variable method, and several other governance indicators. Moreover, our results reveal that in the presence of greater trust, political legitimacy has an enhanced impact on governance.

In this paper we seek to integrate human needs and self-actualisation into the design of organisational governance. We problematise the assumptions that guide established justifications for governance, thus providing an opportunity for this type of theoretical approach. Drawing on Maslow's human psychology, we consider the potentially regressive features of the prescriptions of transaction cost theory (TCT), particularly the new institutionalist approach, and suggest inclusiveness as a mode of coordination that firms may wish to pursue to enhance self-actualisation. The main value added of this contribution is to highlight the need to discern among modes of governance design, using criteria of welfare maximisation by enabling opportunities for self-actualisation within the firm, different from the TCT focus on internal efficiency.

This paper advances a pre-colonial institutional thesis to explain the variation in the salience of ethnicity in African societies. It posits that pre-colonial political centralization facilitated the accumulation of economic and institutional advantages, positioning descendants of centralized ethnic groups to benefit from these advantages within postcolonial states. Social identity choices are rational; therefore, descendants of centralized ethnic groups, who enjoy greater advantages within the nation, find less incentive to choose their ethnicity over their national identity. Examples from Ethiopia and Ghana as well as the evidence from combining individual-level survey data from the Afrobarometer with historical data on pre-colonial political centralization support the theoretical claim. In particular, the paper presents both theory and evidence indicating that individuals with ancestors from politically centralized pre-colonial societies are less likely to favour their ethnic identity over their national identity . These findings underscore the importance of considering pre-colonial legacies when promoting national unity.

This paper draws on macroeconomics, the economics of institutions and the economics of trust to explain private savings at the national level for 33 OECD (mostly European) countries from 2002 to 2012. More specifically, it raises two questions: (i) is it the quality of institutions or trust in institutions that drives private savings? (ii) if trust matters, what is the appropriate institutional level at which it operates? To answer these questions, we add to the usual explanatory variables of private savings three measures of institutional quality and six measures of institutional trust, distributed between the following institutional levels, presented in assumed hierarchical order: political, legal, financial and social. We find that trust in political institutions is the most significant driver of private savings. This contributes to the literature underlining the importance of subjectivity in social and economic phenomena and suggests, for private bank savings in countries having highly regulated banking systems, the existence of a hierarchy of trust in which trust in the highest-ranking institutions (political – and to a lesser extent legal – institutions) acts as a substitute for trust in every lower-ranking institution (financial institutions and social trust).

It is now abundantly clear that social norms channel behaviour and impact economic development. This insight leads to the question: How do social norms evolve? In a companion paper (Voigt (2023). Journal of Institutional Economics, 20), I survey studies showing that geographical conditions can have direct and long-lasting effects on social norms. This paper goes one step further: It surveys studies that show how different geographical conditions affect both religious beliefs as well as traditions of family organization and how these, in turn, affect social norms.

Institutions matter as regards foreign location investment decisions, but how they matter and in what ways, is still unsettled. We differentiate between absolute and relative institutional effects on both location choice and on the size of the FDI and do so by examining India's outward FDI flows between 2008 and 2020. We find that absolute and relative institutional measures have different effects, and these are noticeable at different stages. We show that the quality of institutions affects location choice, but once they have made that decision then the scale of the investment is impacted by institutional threshold effects and institutional distance, and we explain why this could be the case. We provide further nuance to studies on the asymmetrical effects of institutions on outward FDI. We provide empirical evidence that the effects of absolute institutions matter more where host countries lie at the lower end of the institutional profile distribution. Likewise with institutional distance—it might not be the direction of the difference that matters so much as where the host country is located along the institutional profile distribution. This has substantial consequences from both a managerial and a policy perspective.

It is now abundantly clear that social norms channel behaviour and impact economic development. This insight leads to the question: How do social norms evolve? This survey examines research that relies on geography to explain the development of social norms. It turns out that many social norms are either directly or indirectly determined by geography broadly conceived and can, hence, be considered largely time invariant. Given that successful economic development presupposes the congruence between formal institutions and social norms, this insight is highly relevant for all policy interventions designed to foster economic development. In a companion paper, the role of religion and family organization as potential mediators between geography and social norms assumes centre stage.

It is often argued that governments take advantage of extreme events to expand their power to the detriment of the political opposition and citizens at large. Violations of constitutional constraints are a clear indication of such opportunistic behaviour. We study whether natural disasters, conflicts and other extreme events systematically diminish governments' compliance with constitutional constraints. Our results indicate that governments are most likely to overstep their competences or disregard their responsibilities during civil conflicts, at the onset of international sanctions or following successful coups d’état. Interestingly, Cold War interventions by the United States that installed or supported a political leader led to a decrease in constitutional compliance in the target country, whereas Soviet interventions had no such effect. In contrast, banking crises and natural disasters, which threaten societies at large, but not necessarily the political elite, do not cause a significant decline in constitutional compliance.

A growing strand of literature relates pro-market institutions to business and overall employment creation. However, the effects of pro-market institutions on industry-specific employment creation still need to be better understood. Employment creation in some industries may be more sensitive to pro-market institutions. Moreover, if these industries employ a large proportion of the population, the role of local-level institutions becomes more critical for boosting employment creation across industries. Therefore, we disentangle the effects of local-level pro-market institutions on employment creation across nine major industries by using 5-year balanced panel data of 374 US metropolitan areas from 1972 to 2017. Our fixed-effects results indicate that pro-market institutions boost employment creation only in the manufacturing, retail, and construction sectors. Furthermore, our findings reveal that local public policies can benefit or harm local employment creation, depending on the concentration of industries in the area.

James Buchanan was a fervent advocate of a non-discriminatory politics. However, he translated his views on constitutional political economy into (de jure) constitutional design in an insufficiently thoughtful way. Simply writing non-discriminatory politics into a Constitution is unlikely to have the desired effect. All Constitutional language is open to interpretation and political entrepreneurs will be ready to push interpretation in their favoured directions. The history of US Constitutional law bears this out. This does not necessarily discount Buchanan's quest for constitutionalized non-discriminatory politics. However, it does mean that it must be tempered by realistic concerns regarding constitutional design. With this in mind, I suggest that focusing on procedural, rather than substantive, Constitutional provisions may be more fruitful.

The ancient Greek city-states were slave societies, but the institutions of slavery differed across them. The slaves of democratic Athens were foreigners bought as chattels labouring in agriculture, craftsmanship, banking, mining, and domestic services and were often given some limited freedoms and extra pay. On the contrary, the helots, the slaves of oligarchic Sparta, were indigenous of the lands they cultivated for their masters and were treated harshly. The study offers an economic explanation of the different slavery systems. Modelling the slaveholder as a profit maximiser, it attributes the different systems to differences in the probabilities of the slaves running away or revolting, the dependence of output on effort-intensive or care-intensive production technology, which depends on the fertility of the soil and affects whether the slave is treated kindly instead of harshly, and the cost of guarding slaves under different regimes.

We investigate whether workplace voice through institutionalized forms of employee representation (ER) affects the design of firm hierarchies. We look at the role of ER within a knowledge-based view of hierarchies, where the firm's choice of hierarchical layers depends on the trade-off between communication and knowledge acquisition costs. Using a sample of more than 20,000 private-sector firms in 32 countries, we find that the presence of ER is positively associated with the number of organizational layers, though the relationship is tempered by firm size. ER positively correlates with job training, skill development and enhanced internal communication via staff meetings. The analysis of managers' perceptions suggests the higher frequency of meetings in firms with ER does not lead to more delays in the implementation of organizational changes. Taken together, our findings point to ER as facilitating the flow of information to top decision-makers and hence reducing communication costs. This may enable the firm to economize scarce cognitive resources without retarding the accumulation of new shop-floor capabilities. We contribute to recent literature on organizational design by suggesting ER institutions as possibly relaxing the trade-off between communication and knowledge acquisition costs within firms.