This paper analyses the emergence and persistence of disorder due to bellicose (i.e. ‘conflict-kindling’) institutions. It does so relying on a novel empirical approach, examining the predatory and productive interactions of 400,000 users of a virtual world as well as its institutions. The paper finds that while there are many cases of spontaneous order in that virtual world, and while the users are not more conflict-loving as such, bellicose institutions sanctioning suicidal attacks in a supposedly safe region spontaneously emerged and rigidly persist, thus upholding disorder (i.e. a particularly violent kind of ordered anarchy).

This special issue, devoted to the analysis of colonial institutions in the economic performance of countries both pre- and post-colonialism Africa, aims to be a contribution, in the vein of North (2005), to the field of colonial studies in comparative institutional perspective. The papers in this issue combine the history of economic thought, econometrics, economic history, cliometrics and the analysis of colonial institutions. These approaches shed a new light on the question of path-dependence and historical dynamics. They suggest that as former African colonial countries move away from the colonial period, the shadow of colonial institutions is less marked and is now rivalled in importance by the extent of democracy, which now plays a crucial role in their economic development.

There have been repeated claims that informal institutions play an important or even crucial role in economic development. Yet measuring informal institutions entails serious challenges. This paper identifies the difficulties in measuring informal institutions, critically discusses some attempts hitherto taken and encourages the more intensive use of experiments to measure them.

This article introduces the special issue on climate adaptation and institutions. Economic accounts of climate adaptation have stressed its collective action nature and the limitations of standard economic approaches to the matter. Governance accounts, on their part, have shown that adaptation does not always happen when it is expected. Against this background, institutional economics has the potential to shed light on those societal processes and collective mechanisms leading to and shaping adaptation (or the absence of it). The selection of articles contributing to this special issue shows that climate adaptation can indeed be explored successfully through institutional economics, and that doing so fits well within the institutional economics agenda. Some recommendations for future research are provided at the end.

This introduction canvasses broad themes relating to the nexus of innovation and institutions. It first examines the notion of a “new combination” – a core analytical concept in economic theories of innovation and explanations of emergent novelty through bottom-up processes. Following Schumpeter, different theorists have made different claims about the composition and structure of new combinations. Possible constituent elements include factors of production, capital goods, routines, information, ideas, technologies, and property rights. The article then looks synoptically at the institutional dimensions of innovation from alternative perspectives that focus upon different kinds of institutional rules and policy solutions to innovation problems. Neoclassical and evolutionary approaches tend to emphasize specific policy interventions in markets to channel behavior toward particular desired outcomes, whereas institutional and Austrian approaches tend to focus upon general institutional rules (e.g. property and contract) that frame markets and innovation processes. Finally, this article summarizes the papers in the special issue.

I examine the origin and development of institutions that assign and enforce rights to hard rock minerals located on federal lands in the United States. Hard rock mining gives a prime example of the ‘artificial selection’ of settled customs or working rules by jurists and legislators. The evolving structure of the industry, conditioned by technological and market factors, produced a parallel shift in the locus and control of sovereignty. In the early days sovereignty vested in the mining clubs. The enlarging scale and complexity of mining catalysed a change in both the uses and location of sovereignty. With the transition from prospecting to large-scale industrial mining, the ‘right to use’ mineral deposits obtained through patents became contingent on the cooperation of labour. At this stage, the capture of the state's monopoly on legitimate violence to protect the right to use became a crucial dimension of property. Mining companies have also enjoyed liberties with respect to the externalization of environmental costs. The emergent structure of rights, duties, capacities and exposures was instrumental in bringing forth a quantum increase in the mining of hard rock minerals necessary for industrial expansion. There is, however, an urgent need for reform of the mineral patent system.

Social preferences and third-party enforcement of formal contracts are two mechanisms that facilitate performance of an agreement. The standard argument is that formal, enforceable contracts substitute when the social preferences of trust and trustworthiness are lacking. We explore the alternative hypothesis that trust and contract enforcement are complements. We measure social preferences from both a Trust Game and a social values survey, using them as explanatory variables in a Contract Game. We find that both increased contract enforcement and high trusting preferences lead to enhanced rates of contract formation and larger investments. There is an important interaction effect, where trusting individuals enter into agreements at a greater rate and make larger investments when enforcement is greater. Thus, contracts and trust complement one another.

Analyses of climate adaptation seldom rely on the conceptual toolbox of institutional economics. Yet articles addressing institutions make up a large portion of the climate adaptation literature. With a wealth of institutionally relevant knowledge in the adaptation literature, organizing such knowledge in institutionally meaningful ways can advance the present understanding of the link between institutions and adaptation. Knowing which aspects of this link are well researched, and where in contrast research gaps lie, can provide guidance to institutional economists interested in adaptation. We contribute to this through a systematic review of the adaptation literature, assessing the consideration adaptation scholars give to different elements of the Institutional Analysis and Development framework. Results show a strong focus on collective choice and on adaptation by public actors, with an emphasis on rules in use, social interactions and, to a lesser extent, attributes of the community. Research gaps rather encompass operational and constitutional choice, private adaptation, physical interactions and biophysical conditions.

Africa has seen a steady rise in democracy since the end of the Cold War. This paper investigates two possible implications of democratization in African countries: better economic growth through improved institutions and less civil conflict through increased political participation. Instrumental variables regressions are estimated with the spatial lag of democracy. This instrument varies over time, allowing for consideration of country fixed effects in IV regressions. Large positive impacts of institutions on economic growth and of political participation on reducing civil conflict are found in IV regressions with fixed effects. Further estimates show that both growth and civil violence effects may be driven by civil liberties.

The sharing economy has raised hopes that online platforms will usher in a new era of sharing, even though economic theory suggests that income growth may reduce sharing in the long run. This paper presents evidence that that high-income people are less likely than low-income people to use traditional institutions for sharing goods, including carpools, multi-person households, and garage sales. While it first appears that high-income people are equally likely to use new institutions, such as Craigslist, Airbnb, and Zipcar, this partly reflects the fact that many low-income households in the US still lack an internet connection. Conditional on having internet access, this paper finds that online sharing platforms are also disproportionately used by the poor. The future of sharing likely depends on countervailing forces. Economic growth may continue to dampen incentives to share goods, but this effect could be offset by the proliferation of institutions, norms, and preferences that facilitate sharing.

Was technological progress during and after the Industrial Revolution top-down or bottom-up? The technology that created the great inventions was driven by a combination of pathbreaking ideas and the dexterity and skills of trained artisans. While those forms of human capital were quite different, they both came out of small elites of intellectuals and craftsmen, what are rapidly becoming known as “upper-tail human capital.” I analyze the institutions that drove the incentives for both, and show that they came together to produce the Great Enrichment. These incentives were both material and social: between 1500 and 1700, the search for financial security and reputation cooperated in producing a unique institutional environment in which the elites in Western Europe produced the three legged-stool of European modernity: the Reformation, the Scientific Revolution, and the Enlightenment. Once these three movements had succeeded, the foundation for modern economic growth had been laid.

For various reasons, governments sometimes fail to provide public goods. Private provision of such goods might then be used if it succeeds in overcoming three main problems: high organization costs, the assurance problem, and the free-rider problem. We argue that technologies that enable crowdfunding – the method of funding projects by raising small amounts of money from a large number of people via the internet – have enabled these problems to be overcome more readily. Such technology has lowered organization costs and enabled the employment of more efficient mechanisms to reduce the assurance and free-rider problems. To illustrate these effects, we present two case studies of private provision of public goods via crowdfunding: police services in Rockridge in Oakland, California, and the Ukraine Army.

In response to climate change, many national governments are shifting their focus from ‘safety’ to ‘spatial-planning’ measures in flood governance. Rather than providing full protection against floods, spatial-planning measures aim to reduce the impacts of floods by encouraging damage mitigation in local-level spatial-planning and building choices. This turn to spatial-planning measures has important implications for how costs and responsibilities are divided in flood governance. This paper examines the role of experts in shaping the distributive aspects of this shift. Using a theoretical framework on institutional change, the role of experts is analyzed in two case studies. The first focuses on the United States, where a turn to spatial-planning measures was made in the 1960s. The second case study looks at this turn Dutch flood governance, which has always been characterized by a strong safety paradigm. The paper draws conclusions about the effects of expert-influence on distributive decision-making underlying institutional changes in both cases.

While most scholars emphasize the role of prosocial motivations of contributors in building open online communities, we show that mere users also adhere to their norms of behaviour to some extent. To this end we designed an original experimentation protocol. With the help of the French Wikimédia Foundation, we questioned a large sample (n = 13,000) of Wikipedia users (whether contributors or not). They were invited, after having expressing their feelings about Wikipédia, to play a Dictator Game. A large proportion of respondents, including those who were merely users, chose an equal split (66% of the sample). This surprising result suggests that they have adhered to a social norm of sharing. Investigating the determinants of this result, we prove that an involvement measured by usage (intensity and variety), as well as by attachment to, and time spent, on Wikipedia, is correlated with the choice of the 50/50 split in the dictator game (DG). Furthermore, the method of instrumental variables gives an indication that adherence to the social norm of sharing may be endogenously determined by involvement in the open online community. Our result highlights the importance of interactions with the institutional and technical frameworks of the community.

Bankruptcy has long been the standard approach to reorganizing failing corporate entities. In recent years, bailout, whereby a governmental entity takes charge of the reorganization, has appeared as an alternative. At the enterprise level, there is a Coase-like invariance proposition at work in which a failing concern is replaced by a going concern under either process. Significant differences arise once we move beyond the point of reorganization. The choice between bankruptcy and bailout is fundamentally a choice between alternative arrangements for corporate governance, and not about transforming failing concerns into going concerns because this will happen under either arrangement. We argue that political entanglement in corporate restructuring will tend to preclude the entrepreneurial discovery process. We recount the recent American auto and financial industry bailouts, highlighting how each episode was guided by political considerations, which served to distract the restructuring process from discovering those opportunities that market-based restructuring would have discovered.

This paper analyses the origin of innovation using institutional economic theory. Because of distributed information and fundamental uncertainty, an efficient institutional context for the economic organization of innovation in its early stages is often that of a common pool resource. The theory of the innovation commons draws upon Hayek, Williamson and Ostrom to present the innovation problem as a combined knowledge problem, implicit contracting problem and collective action governance problem. Innovation commons theory also implies that Kirzner's model of entrepreneurial opportunity discovery extends to higher-order groups, suggesting a multilevel selection model of economic evolution.

The incremental reform hypothesis implies that constitutions are rarely adopted whole cloth but instead emerge gradually from a series of reforms. The starting point, scope for bargaining, and number of reforms thus jointly determine the trajectory of constitutional history. We test the relevance of this theory for Africa by analysing the formation and reform of the independence constitutions negotiated and adopted during the 1950s and early 1960s. We provide historical evidence that independence occurred in a manner consistent with the incremental reform hypothesis. After independence, constitutional bargaining continued, although the alignment of interests inside and outside government initially favoured illiberal reforms. Liberal trends re-emerged a few decades later. We provide statistical evidence of incremental reform during both post-independence sub-periods. In general, the African countries that experienced the fewest constitutional moments and the narrowest domain of bargaining in the first decades of independence tend to have better contemporary institutions than states that began with less restrictive constitutional rules and experienced more constitutional moments.

The Hayek–Friedman hypothesis states that economic freedom is causally associated with stable democracy. I test a particular element of the hypothesis focusing on press freedom, which is arguably a necessary component of any democratic polity. Combining the Freedom House index of press freedom and the Heritage Foundation Index of Economic Freedom yields a large annual panel dataset between 1993 and 2011. Estimates show that improvements in economic freedom are associated with subsequent improvements of press freedom. The overall association is mainly driven by changes in market openness.

Does innovation proceed from the top down or the bottom up? This is a crucial question for those who think about the sources of economic growth and especially for those who think about policies and institutions to promote innovation. The answer lies in part with the structure of the existing system of production and the array of assets that an innovation would displace, especially on the extent of complementarity and modularity in that structure. But it also depends on institutions. This paper argues for the centrality of decision rights to the process of innovation. Especially if it takes place in a systemic, non-modular way, innovation may require unified decision rights, often implying integrated control of complementary stages of production, in order to overcome the dynamic transaction costs of change. But the processes of subdivision, differentiation, and learning – the processes of fission, forking, and fine tuning – may also require changes in decision rights in order to overcome dynamic transaction costs. I illustrate these points with a case study of three generations of an American family of inventor-entrepreneurs in electricity and electronics.

In this paper, we take a Public Choice perspective to identify and categorise barriers to efficient public climate adaptation. Specifically, we distinguish three dimensions of public adaptation: extent, structure (form and timing) and organisation (coordination across territorial authorities and policy fields). Within each of these dimensions, we investigate how the self-interest of voters, pressure groups, bureaucrats and politicians may bias adaptation decisions. Thus, we indicate specific barriers to efficient public adaptation. Based on this framework, we illustrate how Germany's response to major flood disasters reflects the incentive structure of concerned stakeholders and their political interaction. The ad hoc character of some public adaptation measures implies a clear bias from the efficient benchmark. In conclusion, we argue that the propositions of Public Choice theory shed some light on how empirical public adaptation processes unfold.