In recent years, a novel, specifically institutional approach to public regulation has become popular, particularly in the Anglo-Saxon world: ‘Libertarian Paternalism’ promises to tackle society's problems in a way that increases welfare without compromising people's freedom and autonomy. The key instrument advanced by this programme is nudges. Although nudges’ ethical quality has been discussed at length, the political economy driving their implementation by self-interested (and possibly boundedly rational) policy makers and bureaucrats has been largely neglected so far. This paper elaborates on how this gap might be filled.

Unrealized potential of entrepreneurial activities in developing countries has often been attributed to missing formal market-based institutions. In new institutional economics, the concept of ‘voids’ is suggested to describe the absence of market-based institutions. In reality, however, ‘institutional fabrics’ are always and necessarily complex and rich in institutions. No societal sphere is institutionally void. In this article, we contribute to existing literature on entrepreneurship and institutional economics by presenting a framework for studying the richness and complexities of institutional fabrics, as well as ways in which entrepreneurs respond to institutions. Distinguishing four types of institutions relevant for entrepreneurs, we analyze case study data from Ethiopia, and discuss how ‘tensions’ between potentially incompatible institutions result in behavioral frictions. Some entrepreneurs play the complex institutional environment and benefit from the tensions in it, whereas others may drown into the institutional ‘swamp’ they face. Policy makers should acknowledge that institutions not only result from formal policy making and that in many cases a diverse set of institutions is needed to facilitate market exchange and solve constraining tensions. The diversity that results from initiatives of institutional entrepreneurs may create a more effective institutional environment for development.

The contractual, single-exchange framework in Coase (1960) contains the implicit assumption that exchange in property rights does not affect future transaction (i.e., trading) costs. This is pertinent for analyzing use externalities but limits our understanding of property institutions: A central problem of property markets lies in the interaction among multiple transactions, which causes exchange-related and non-contractible externalities. By retaining a single-exchange simplification, the economic analysis of property has encouraged views that: overemphasize the initial allocation of property rights, while some form of recurrent allocation is often needed; pay scant attention to legal rights, although these determine enforceability and, therefore, economic value; and overestimate the power of unregulated private ordering, despite its inability to protect third parties. These three biases have been a misleading policy in many areas, including land titling and business firm formalization.

This introduction considers the highly influential contribution of Douglass C. North to economic history and institutional economics, as it developed from the 1960s until his death in 2015. It sketches the evolution of his arguments concerning the roles of institutions, organizations and human agency. North's conception of the economic actor became progressively more sophisticated, by acknowledging the role of ideology and adopting insights from cognitive science. Eventually, he abandoned the proposition that institutions are generally efficient, to propose instead that sub-optimal institutional forms could persist. A few noted criticisms of North's work are also considered here, ranging from those which are arguably off the mark, to others that retain some force. The contributions to this memorial issue are outlined at the end of this introduction.

This article demonstrates that the network structures of historical regimes influence the way information is spread, which in turn circumscribe the behaviors of the different groups that make up the system. It advances two central claims. The first is a methodological one showing that patterns of long-term historical change are best studied at the system level, rather than by a traditional equilibrium framework grounded in models of individual behavior. Then, an empirical claim is established by comparisons of China's hub-and-spoke hypernetwork with Europe's multi-hub hypernetwork to show that their different patterns of interconnectivity forged their respective capacities to weather intermittent socioeconomic transitions.

Since the 1990s, most European countries have adopted detailed corporate governance codes regulating listed companies. Even though the initial codes were designed against the backdrop of a particular jurisdiction, best practice standards have become remarkably similar across legal traditions. This raises the question whether the codes are sufficiently responsive to local conditions, or standard setters are mainly motivated by the concern not to fall behind internationally accepted benchmark standards. The article quantifies central corporate governance provisions and maps their international diffusion. Controlling for differences in legal families and ownership structure, the article shows that the diffusion of best practice standards leads to a statistically significant increase in the likelihood that a foreign standard setter will adopt a broadly similar provision. The findings indicate that codes are often seen as signaling devices, irrespective of whether or not the adopted standards are well aligned with the domestic economic and legal environment.

Douglass North's writing on institutional change recognized from the very start that such change depends on cognition and beliefs. Yet, although he focused on individual beliefs, we argue in this paper that such beliefs are social constructs. We suggest that institutions – rules, expectations, and norms – are based on shared cognitive rules. Cognitive rules are social constructs that convey information that distills and summarizes society's beliefs and experience. These rules have to be self-enforcing and self-confirming, but they do not have to be ‘correct’. We describe the characteristics of such rules in the context of a market for ideas, and illustrate their importance in two developments central to the growth of modern economies: the rise of the modern state with its legitimacy based on consent, and the rise of modern science-based technology that was the product of the scientific revolution and the Enlightenment.

Benito Arrunãda's paper on the transaction cost problems involved with land, provides an excellent explanation of land legal institutions. This explanation revolves around the fact that land exists through time, and that various exchanges made with respect to land at one time affect exchanges in other times. Arrunãda refers to this as ‘sequential exchange’, and he argues that sequential exchange provides the explanation for state involvement in titling and the default nature of in rem rights. Unfortunately, Arrunãda frames his argument with an inappropriate notion of transaction costs. This creates a confusing language, and a faulty interpretation of Coasean logic. Reframing the first sections of his paper using the ‘property rights’ definition of transaction costs brings brevity and clarity to the ultimate point he is trying to make.

Coase's (1960) contractual single-exchange framework is challenged by Arruñada (2017) as a framework that cannot be used to understand the complex nature of property law and related institutions. Arruñada proposes the sequential exchange model as an alternative framework. Differences between the two approaches are considered and some applications in land and natural resources are used to evaluate his critique. These cases support Arruñada's critique of the simple contracting approach to property, showing that for many natural resources private contracting has not been the solution and that a mix of property institutions govern. Contrary to Arruñada, however, I argue that the limits of the single-exchange framework arise not because of sequential exchange, but because assets (parcels of land) are complex and physically connected.

Before economists and sociologists came up with their own definitions of the term ‘capital’, it was commonly understood as money invested in businesses by their owners or shareholders, and it continues to be understood this way in everyday business practice. In a recent article, Hodgson (2014) advises economists to return to this pre-Smithian usage of the term. This paper takes up Hodgson's demand and develops a theory of capital that is based upon this business notion of capital. It also argues that the Austrian theory of capital, if interpreted correctly, can serve as a starting point. Despite the conviction of its adherents to the contrary, the Austrian theory of capital is not universal or ahistorical, but dovetails with Hodgson's vision of an approach to capital that analyses historically specific features of capitalism.

In this paper, we trace the emergence and the evolution of property rights from the Homeric Era (1100–750 BCE) to Classical Greece, based on ancient sources and modern interpretations. Indications of the emergence of property rights are to be found in the writings of eighth century Homer and Hesiod. Property rights evolved, together with changes in warfare and city-states during the Archaic and Classical periods, becoming more secure and specific, based on contracts. We analyse as case studies Themistocles’ Naval Law of 483/2 BCE and Nicophon's Monetary Law of 376/5. We also cover some other aspects of property rights, such as commercial transactions and the enforcement of contracts, official (written) law and legally binding procedures of law enforcement, banking services and the rights of women.

While it is now well established in the literature that countries with better policies and institutions, as measured by the Economic Freedom of the World index, have better outcomes in terms of prosperity, growth, and measures of human well-being. However, we know little about the process of institutional reform – that is why and how country policies undergo major changes either upward or downward in their levels of economic freedom. This research attempts to provide a systematic overview of this process, by uncovering what the data really show about this transition process. Institutional declines occur more abruptly than institutional improvements, and free trade appears to be a key ‘first mover’ in cases of large institutional change.

A popular explanation for economic development is that ‘individualistic values’ provide a mind-set that is favorable to the creation of growth-promoting institutions. The present paper investigates the relationship between individualistic values and personal attitudes toward government intervention. We consider two key components of an individualistic culture to be particularly relevant for attitude formation: self-direction (‘social’ individualism) and self-determination (‘economic’ individualism). Results indicate that both are negatively associated with interventionist attitudes. Effects of self-direction are much weaker though, than self-determination. Moreover, the effects of self-direction are mitigated through higher trust in the state and lower confidence in companies, while that is not the case for self-determination values. We conclude that especially economic individualism supports attitudes conducive to the formation of formal market-friendly institutions.

Using an extensive dataset covering 187 countries during 1993–2011, this paper explores the impact of media freedom from government control on women's rights. To measure women's rights, we consider economic, political and social rights that capture the extent of government's respect for these rights at country level over time. A free press improves government's accountability to the society and leads to better governance. In the context of women's rights, a free press can enhance positive rights by helping women raise voices and gain recognition, and thereby making the government create a more conducive environment for women's empowerment. Further, higher press freedom can reduce the infringement of negative rights by calling for greater public accountability. Yet, a free media, while necessary, may not be sufficient in enhancing such rights, and other institutional factors related to a country's development might be essential to reap the benefit of a free media. Our estimated marginal impacts show that greater access of media (in the form of internet and mobile users) and countries with greater democratic capital enhance the impact of media freedom on women's economic and social rights, with little effect on political rights.

In a seminal 1989 article, Douglass North and Barry Weingast argued that by making the monarch more answerable to Parliament, the Glorious Revolution of 1688 helped to secure property rights in England and stimulate the rise of capitalism. Similarly, Daron Acemoglu, Simon Johnson, and James Robinson later wrote that in the English Middle Ages there was a ‘lack of property rights for landowners, merchants and proto-industrialists’ and the ‘strengthening’ of property rights in the late 17th century ‘spurred a process of financial and commercial expansion’. There are several problems with these arguments. Property rights in England were relatively secure from the 13th century. A major developmental problem was not the security of rights but their feudal nature, including widespread ‘entails’ and ‘strict settlements’. 1688 had no obvious direct effect on property rights. Given these criticisms, what changes promoted the rise of capitalism? A more plausible answer is found by addressing the post-1688 Financial and Administrative Revolutions, which were pressured by the enhanced needs of war and Britain's expanding global role. Guided by a more powerful Parliament, this new financial system stimulated reforms to landed property rights, the growth of collateralizable property and saleable debt, and thus enabled the Industrial Revolution.

In his rich contribution, Arruñada (2017) debates what institutions are needed to enforce complex ‘sequential’ transactions embedded in interdependent private contracts, and more specifically discusses the conditions of their efficiency when it comes to transferring property. Beyond acknowledging the importance of this issue and the very stimulating and often counterintuitive ideas developed in the paper, this short note challenges some of the positions adopted by Arruñada, particularly regarding the relevance of ‘The problem of social cost’ (Coase, 1960) for dealing with this issue. It also raises questions about the institutional, hybrid arrangement advocated as the solution for dealing with sequential transactions.

In ‘Violence and Social Orders’, North, Wallis and Weingast highlight the need of societies to control large-scale violence. In response to this need, a variety of social orders has emerged with differing institutional, political and economic characteristics. One of these social orders is the limited access order that was prevalent in most of history and still is nowadays. Taking the conceptual framework of North et al. as a starting point, we make three advances to their analysis of limited access orders. First, we analyse the incentive structure of actors involved, using a formal model of the main interactions in a limited access order. Second, we decompose organizations into two types and analyse their respective roles. Third, we use insights from historical research to scrutinize the chronology of the rise of organizations. Jointly, this allows us to refine and substantiate the insights gained by North et al., highlight the role of organizations and place the start of relevant developments earlier in time.

From a New Institutional Economics (NIE) perspective, standards are acknowledged to play a central role in building efficient market infrastructure by defining what is exchanged and reducing the level of transaction and measurement costs. Nevertheless, only a few prior NIE studies have considered standard-setting activities as coordination and governance issues per se. This article aims to fill this gap by adapting and extending the classical Williamsonian analytical framework to the governance of standard-setting institutions. This analysis is substantiated by empirical data on global private standards in the agricultural sector. Our results highlight the importance of standard selection and the limits to current harmonisation as regards institutional failure to define alternative multilateral governance mechanisms at the international level.

In his important article, Benito Arruñada draws out the significance of sequential exchange for property rights and traces inadequacies in the economics of property rights to its overly contractual focus, to the exclusion of multiple transactions on the same asset. In this comment, I argue that although Arruñada's problem is a genuine one, it is part of a larger inadequacy in the economic analysis of property rights: property institutions have to manage complexity stemming from many kinds of interactions, making it problematic to focus solely on local interactions. Modular structures in property, including legal ‘things’ themselves, serve to manage this complexity. The larger problem of complexity allows us to set sequential exchange in its proper context.

We argue that the reason why it has proved hard to determine whether negative effects on economic performance and conflict are more strongly associated with polarized rather than fractionalized societies is because the distinction between polarization and fractionalization is only relevant for societies with ethnic diversity above a certain threshold. In addition, high levels of ethnic fractionalization at a country level are generally associated with regional concentration of minorities, and as a result, many regions may have a very different ethnic composition from the national average, and in particular, they may have much higher levels of ethnic polarization than the national level. Because of the very different ethnic composition of different regions in this situation, conflict is more likely to be confined to a limited geographical area.