discussion of the paper "endogeneizing institutions and institutional change", by masahiko...

Motivation Argument Conclusions References

Discussion

Endogeneizing Institutions and Institutional Changeby Masahiko Aoki

Journal of Institutional Economics, v.3, n.1, Apr.2007, p.1-31

Matheus Albergaria de Magalhães

Economia das Organizações IIFundamentos Econômicos da Estratégia (20151)

Universidade de São Paulo (USP)May 13th, 2015


Endogenizing Institutions and Institutional Change (Aoki 2007)


SECTIONS

Motivation

Argument

Conclusions

References




MOTIVATION

Institutions: humanly devised constraints that structurehuman interaction ("rules of the game") (North 1990, 1991, 1994).

Fact: Institutions matter.

Kickoff: let’s look at a few examples.




MOTIVATION

Figure 1Satelitte Night Images: North and South Korea

Source: Google Images.




MOTIVATION

Figure 2Legal Origins: World

Source: La Porta et al.(2008, p.289).




MOTIVATION

Figure 3Corruption: Unpaid Parking Tickets, U.N. Diplomats

Source: Fisman & Miguel (2007).




MOTIVATION

Figure 4Bureaucratic Efficiency and GDP Per Capita: World

Source: Mauro (1995).




MOTIVATION

Figure 5Time to Start a Business: Selected Countries

Source: Filártiga (2007, p.133).




MOTIVATION

Figure 6Settlers’ Mortality Rates and GDP per Capita: Selected Countries

Source: Acemoglu et al. (2001).




MOTIVATION

What is the Main Question?

There are at least two questions:

1. Can we find a new definition of institutions that may helpintegrating various disciplinary conceptualizations of theterm?

2. Are game-theoretic mechanisms useful for understandinginstitutional change?




MOTIVATION

Why are these questions important?

Institutions ("rules of the game") treated in two distinct ways:

1. Rules in a hierarchical order ("exogenous view").

2. Institutionalized rules seem as endogenously shaped andsustained in the repeated operational plays of the game("endogenous view").

Author will try to examine how these two views deal with thephenomenon of institutional change.




ARGUMENT

How does the author plan to go about providing an answer?

Roadmap:

1. Game-theoretic characterization of the two views.

2. Incorporation of Bounded Rationality in the EndogenousView.

3. Four prototypes of the Domain of the Game (Social Norm;Political State; Economic Contracts; Organizational Structure) andtheir linkages.

4. Dynamic considerations.




ARGUMENT

Aoki (2007) employs the concept of game-form to pinpointdifferences in the "exogenous"and "endogenous"views.

Two insights:

1. Institution seem as a game-form.

2. Institution as an endogenous equilibrium outcome of thegame.




ARGUMENT

New definition of an institution:

"An institution is self-sustaining, salient patterns of social interactions, asrepresented by meaningful rules that every agent knows and incorporated asagents’ shared beliefs about the ways how the game is to be played.”(Aoki, 2007, p.7).




ARGUMENT

Figure 7Dualities of Institutions

Source: Aoki (2007, p.10).




ARGUMENTMore Insights:

I Implications in an institution: summary representation(rules cum beliefs) regarding the endogenous nature ofgame-state.

I Wide differences and variety in how players deal withinformation sets (no need for perfect information).

I Each player cannot know the choices of all other players intheir entirety.

I Rule and associated beliefs need to be continuallyreconfirmed and reproduced through relevant strategic playof players.




ARGUMENT

Four Prototypes of the Domain:

1. Economic Exchange Domain: transactions of private goods.

2. Organizational Exchange Domain: player of the game inan economic domain or an institution in the domain ofwork collaboration.

3. Political Exchange Domain: two types of agents(government and multiple private agents).

4. Social Exchange Domain: social symbols that directlyaffect the payoffs of players are unilaterally delivered and/orexchanged with "unspecified obligations to reciprocate".




ARGUMENT

Institutional Linkages:

I Linked Games: players coordinate their choices ofstrategies across more than one domain so as to gain morepayoffs than the sum of payoffs that could be possiblefrom playing in each separate domain.

Examples: Common Pool Resources (Ostrom, 1999; 2000; 2010)and Worker Discipline Devices (Ellingsen & Johannesson, 2007)




ARGUMENT

Institutional Linkages:

I Institutional Complementarities: even if agents do notconsciously coordinate their own choices across domains,they regard an institution in another domain as a parameterand accordingly choose strategies.

Powerful analytical tool: (i) it explains variety of overallinstitutional arrangements across economies; (ii) it is notconditional on consensus among agents.




ARGUMENT

Question: how do boundedly rational agents changeinstitutions?

I Institutional change may be characterized by a quantumshift in the equilibrium constellation of agents’ strategies.

I This change can generate (and be induced by) changes inagents’ shared behavioral beliefs.

I Bounded rationality plays an essential role in the process.

I Cumulative consequences of repeated plays may generateinternal inconsistencies.




ARGUMENT

Dynamics: three mechanisms of cross-domain institutionalchange

I Schumpeterian Innovation in bundling.

I Social Embededdedness encompassing sequentially arisingdomains.

I Dynamic Institutional Complementarities.




CONCLUSIONS

Main goal of the paper: propose a unified, analytical andconceptual framework for understanding the roles of social,political, economic and organational factors and theirinterdependencies in the process of institutional change.

Conclusion: institutions in the past and in the future aremutually interlinked in a complex manner("history matters", as well as "institutions matter").




CONCLUSIONSMy Impressions:

I Inovative attempt to explain institutions and institutionalchange (North, 1990, 1991, 1994; Nelson & Sampat, 2001) based onGame Theory and Mechanism Design concepts (Maskin,2007; Myerson, 2007).

I Possibility of integration among distinct disciplines(economics, history, sociology, etc.).

I Clear interface with the insights of authors like Coleman(1990) and Ostrom (2000).

I Challenge: integrate new theoretical insights with betterempirical measures related to the concepts of institutionsand institutional change.




REFERENCESAcemoglu, D., Johnson, S., Robinson, J. A. (2001). The colonial origins ofcomparative development: an empirical investigation. American EconomicReview.http://doi.org/10.1257/aer.91.5.1369.

Coleman, J.S. (1990). Foundations of social theory. Cambridge: HarvardUniversity.

Ellingsen, T., Johannesson, M. (2007). Paying respect. Journal of EconomicPerspectives, 21(4), 135–149.http://doi.org/10.1257/jep.21.4.135.

Filártiga, G. B. (2007). Custos de transação, instituições e a cultura dainformalidade no Brasil. Revista do Bndes, 14(28), 121–144.

Fisman, R., Miguel, E. (2007). Corruption, norms, and legal enforcement:evidence from diplomatic parking tickets. Journal of Political Economy, 115(6),1020–1048.http://doi.org/10.1086/527495.




REFERENCES

La Porta, R., Lopez-de-Sillanes, F., Shleifer, A. (2008). The economicconsequences of legal origins. Journal of Economic Literature, 46(2), 285–332.http://doi.org/10.1257/jel.46.2.285.

Maskin, E. (2007). Mechanism Design Theory: how to implement socialgoals. Nobel Lecture. Retrieved fromhttp://www.nobelprize.org/nobelprizes/economic −sciences/laureates/2007/maskin − slides.pdf .

Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics,110(3), 681–712..

Myerson, R. B. (2007). Perspectives on mechanism design in economic theory.Nobel Lecture. Retrieved fromhttp://www.nobelprize.org/nobelprizes/economic −sciences/laureates/2007/myerson − slides.pdf .




REFERENCES

Nelson, R.R., & Sampat, B.N. (2001). Making sense of institutions as a factorshaping economic performance. Journal of Economic Behavior and Organization,44(1), 31–54.http://doi.org/10.1016/S0167-2681(00)00152-9.

North, D.C. (1990). Institutions, institutional change and economic performance.Cambridge: Cambridge University.

North, D.C. (1991). Institutions. Journal of Economic Perspectives, 5(1), 97–112.http://doi.org/10.1257/jep.5.1.97.

North, D.C. (1994). Economic performance through time. The AmericanEconomic Review, 84(3), 359–368.




REFERENCES

Ostrom, E. (1999). Coping with tragedies of the commons. Annual Review ofPolitical Science, 2(1), 493–535.http://doi.org/10.1146/annurev.polisci.2.1.493.

Ostrom, E. (2000). Collective action and evolution of social norms. Journal ofEconomic Perspectives, 14(3), 137–158..

Ostrom, E. (2010). Beyond markets and states: polycentric governance ofcomplex economic systems. American Economic Review, 100(3), 641–672.http://doi.org/10.1257/aer.100.3.1.




Thank YouMatheus Albergaria de Magalhães

[email protected]

http://www.sites.google.com/site/malbergariademagalhaes



[email protected]

http://www.sites.google.com/site/malbergariademagalhaes

discussion of the paper "endogeneizing institutions and institutional change", by masahiko...

Education

institutional change

institutions rules

institutions matter

new definition of institutions

game north

institutionalized rules

selected countriessource

google images