Christopher J. Coyne

Context Matters: Institutions and Entrepreneurship

This survey explores the important connection between institutions and entrepreneurship. Institutions consist of the formal and informal rules of the game. Entrepreneurs act within a context determined by these rules. The rules of the game create payoffs that make certain entrepreneurial opportunities more attractive than others. We explore the relevant literature from institutional economics and entrepreneurial studies, focusing on the important link between the two. Particular emphasis is placed on entrepreneurship within several different institutional settings — private for-profit, private nonprofit, and political — as well as the impact of entrepreneurship on institutions. We conclude by discussing the implications for future research on the topic.

Media as a Mechanism of Institutional Change and Reinforcement

We argue that mass media is a mechanism of institutional evolution and identify three important effects media has on institutions. The gradual effect involves media contributing to marginal changes in existing institutions. The punctuation effect involves media catalyzing rapid institutional overhaul. The reinforcement effect involves media contributing to the durability and sustainability of punctuated institutional equilibria. Our analysis identifies a paradoxical relationship between mass media and institutions wherein media both changes and reinforces existing institutions. This finding resolves a tension in the institutional literature that defines institutions by their durability but recognizes we observe (sometimes rapid and radical) institutional change. Case studies from the collapse of communism in Poland and Russia illustrate our argument. Copyright 2009 Blackwell Publishing Ltd.

The Problem of Credible Commitment in Reconstruction

Reconstruction involves military occupation with the aim of rebuilding and reforming both formal and informal institutions along liberal democratic lines. We contend that successful reconstructions require mechanisms which make reforms credible over the long-run. In the absence of a signal of sustained credible commitment, institutional reforms will not be trusted by the populace resulting in the failure of the broader reconstruction. The incentive, information and epistemic aspects of the credible commitment problem are analyzed. We also consider potential solutions to the problem of credible commitment. Absent such solutions, attempts to export institutions via military occupation should be either limited in their scope or curtailed entirely.

Does the market self-correct? Asymmetrical adjustment and the structure of economic error

Abstract While both errors of overoptimism and errors of overpessimism are possible in the face of imperfect information, the presence of option value from deferring a decision to exchange causes trader errors to be overpessimistically biased. This is problematic because, unlike errors of overoptimism, errors of overpessimism are not ‘automatically’ revealed to the agents who make them. Furthermore, owing to the ‘bad news principle of irreversible investment,’ these errors are likely to persist. We show how entrepreneurial activity corrects such errors and prevents their persistence, creating a tendency towards market efficiency despite the presence of imperfect information.

The fatal conceit of foreign intervention

The fatal conceit is the assumption that the world can be shaped according to human desires. This paper argues that the logic of the fatal conceit can be applied to foreign interventions which go beyond the limits of what can be rationally constructed by reason alone. In suffering from the fatal conceit, these interventions are characterized by: (1) the realization that intentions do not equal results, (2) a reliance on top-down planning, (3) the view of development as a technological issue, (4) a reliance on bureaucracy over markets, and (5) the primacy of collectivism over individualism. These characteristics explain why interventions extending beyond the limits of what can be rationally constructed tend to fail.

Rebuilding War-Torn States: The Challenge of Post-Conflict Economic Reconstruction , by Graciana Del Castillo

In this book, Graciana Del Castillo draws on theory, her own experiences as senior economist in the Cabinet of the United Nations secretary-general and as an International Monetary Fund staffer, and qualitative case studies to critically reconsider the challenges of postconflict economic reconstruction. The core argument is as follows. Countries making the shift from war to peace face a multipronged transition in the economic, legal, political, social, and security sectors. Given this multifaceted transition, economic reconstruction is fundamentally different from the “development as usual” approach taken by the international community to address typical socioeconomic challenges faced by peaceful developing countries. Instead, economic reconstruction in postconflict countries is a “development plus” challenge, meaning that these countries face the same challenges as other developing countries plus the added challenge of achieving reconciliation and peace. Del Castillo concludes that many post–Cold War reconstruction efforts have failed because of the development as usual approach to reconstruction, a lack of comprehensive planning, insufficient aid and assistance, and the inadequacies of international organizations (e.g., the United Nations and international financial institutions) in dealing with the challenges of reconstruction.

Comment on Hanssen and Meehan, ‘‘Who Integrated Major League Baseball Faster Winning Teams or Losing Teams?’’

In this short note, the authors contrast their own recent work on racial integration in Major League Baseball with that of two other groups: Hanssen and Meehan (2009) and Goff, McCormick, and Tollison (2002). While reaching dissimilar conclusions, both groups understate the role of the entrepreneur in the process of integration and rely too heavily on a continuous estimation model for a discrete dependent variable.

Une analyse économique du piratage informatique

Dans cette introduction breve a l’article «xa0Une analyse economique du piratage informatiquexa0», nous voulons souligner que les a priori conceptuels de Peter Leeson et Christopher Coyne les empechent de penser l’organisation pirate dans son ensemble, et concentrent l’attention sur les travers et couts associes a la piraterie sans en prendre en compte ni les implicites ideologiques ni les benefices. Dans leur article, Leeson et Coyne enfourchent la thematique courue des incitations a etre pirate...