Claude Ménard

Handbook of new institutional economics

INTRODUCTION.- THE DOMAIN OF NEW INSTITUTIONAL ECONOMICS: Institutions and the Performance of Economies over Time - Douglass C. North.- The Institutional Structure of Production - Ronald Coase.- Transaction Cost Economics - Oliver E. Williamson. POLITICAL INSTITUTIONS AND THE STATE: Electoral Institutions and Political Competition: Coordination, Persuasion and Mobilization - Gary Cox.- Presidential versus Parliamentary Government - John Carey.- Legislative Process and the Mirroring Principle - Matthew McCubbins.- The Performance and Stability of Federalism: An Institutional Perspective - Barry Weingast. LEGAL INSTITUTIONS OF A MARKET ECONOMY: The Many Legal Institutions That Support Contractual Commitments - Gillian K. Hadfield.- Legal Systems as Frameworks for Market Exchanges - Paul Rubin.- Market Institutions and Judicial Rulemaking - Benito Arrunada and Veneta Andonova.- Legal Institutions and Financial Development - Thorsten Beck. MODES OF GOVERNANCE: The New Institutional Approach to Organization - Claude Menard.- Vertical Integration - Paul Joskow.- Solutions to Principal-Agent Problems in Firms - Gary Miller.- The Institutions of Corporate Governance - Mark Roe.- Firms and the Creation of New Markets - Erin Anderson and Hubert Gatignon. CONTRACTUAL ARRANGEMENTS: The Make or Buy Decisions: Lessons from Empirical Studies - Peter Klein.- Agricultural Contracts - Douglas Allen and Dean Lueck.- The Enforcement of Contracts and Private Ordering - Victor Goldberg. REGULATION: The Institutions of Regulation. An Application to Public Utilities - Pablo Spiller and Mario Tommasi.- State Regulation of Open-Access, Common-Pool Resources - Gary Libecap.- Property Rights, and the State - Lee Alston and Bernardo Mueller.- Licit and Illicit Firm Responses to Public Regulation -Lee Benham. INSTITUTIONAL CHANGE: Institutions and Development - Mary M. Shirley.- Institutional and Non-Institutional Explanation of Economic Differences - Stanley L. Engerman and Kenneth L. Sokoloff.- Institutions and Firms in Transition Economies - Peter Murrell.- Social Capital, Social Norms and the New Institutional Economics - Philip Keefer and Steve Knack.- Commitment, Coercion and Markets: The Nature and Dynamics of Institutions Supporting Exchange - Avner Greif. PERSPECTIVES: Economic Sociology and New Institutional Economics - Victor Nee and Richard Swedberg.- Doing Institutional Analysis: Digging Deeper than Markets and Hierarchies - Elinor Ostrom.

Markets as institutions versus organizations as markets? Disentangling some fundamental concepts

Abstract This paper argues that ambiguities in concepts as important as “institutions”, “markets”, and “organizations”, undermine progress of research programs intending to take these components seriously into account. After a short review of some current confusions (section I) section II discusses recent literature to arrive at definitions that encapsulate fundamental characteristics into “pure categories”. In section III, exceptions and qualifications are introduced so as to operationalize the concepts: in the “real” world 1. (i) organizations and markets are embedded in an institutional framework, and 2. (ii) they overlap, giving birth to “hybrid forms”. However, the conclusion contends that it is essential to maintain distinct concepts in order to understand these complex arrangements.

A New Institutional Approach to Organization

Modern economic theory has long neglected, even ignored, the analysis of the different modes of organization that characterize a market economy. Notwithstanding the efforts of Alfred Marshall, one of its founding fathers, in identifying the properties of “business organizations” (1920, Book IV, chap. 10 sq.), standard microeconomics relied for decades on the concept of firms as production functions, an umbrella to the technologically determined combination of inputs. This situation has changed under the influence of the celebrated paper by Coase on “The Nature of the Firm” (1937). There are now several alternative theories of organization in economics1, with “transaction cost economics”, “agency theory”, “property rights theory”, and a mix of resource-based and evolutionary perspective as the leading approaches.2 Beyond serious divergences, this diversity of approaches is striking. The development of competing explanations reflects an increasing interest for the nature of organizations. This becomes particularly obvious when looking at the resurgence of the literature on the theory of the firm, but also at the booming number of papers on other modes of organizations, e.g., strategic alliances, joint ventures, etc. However, it also suggests that we still miss an integrated theory. This chapter reviews what we have learned and some unsolved problems about alternative modes of organization. It does so by focusing almost exclusively on contributions rooted in the new institutional approach, which is

Organizational Issues in the Agrifood Sector: Toward a Comparative Approach

This paper outlines a research program comparing the economic organization of agriculture in the United States and European Union. Both have highly developed agricultural sectors but their organizational arrangements vary widely. Comparative analysis not only provides a broad set of firms and industries to compare, but also highlights the interaction between the institutional environment and the arrangements established to govern agricultural transactions. We first assess the common trend toward consolidation and vertical integration, turning next to the economic organization of formal and informal networks. While history and path dependence explain some of the variety among U.S. and European practices, other local conditions are important as well. We conclude by assessing the policy implications of recent changes in economic organization.

Institutions, Contracts and Organizations

This outstanding book presents new original contributions from some of the world’s leading economists including Ronald Coase, Douglass C. North, Masahiko Aoki, Oliver E. Williamson and Harold Demsetz. It demonstrates the extent and depth of the New Institutional Economics research programme which is having a worldwide impact on the economics profession.

Cooperatives: Hierarchies or Hybrids?

This paper explores the possibiloity of characterizing the variety of cooperatives through the lenses of transaction costs economics. A typology of cooperatives as hybrid arrangements is proposed. Cponsequences with respect to regulatory issues are discussed.

Measuring the Welfare Effects of Reform: Urban Water Supply in Guinea

Abstract Reforming public utilities remains high on the agenda of economists and policy-makers. Few studies however have measured the impact of these reforms on welfare. This paper analyzes the radical changes in the arrangement providing water to Conakry (Guinea) and estimates the consequences of that reform on consumers, the government, and the foreign owners involved in the process. It shows that notwithstanding a difficult institutional environment, private sector participation benefited all constituents. It does so using a comparative method, with the actual results compared to a counterfactual scenario. The robustness of our results is supported by sensitivity tests.

A Transitory Regime Water Supply in Conakry, Guinea

Both consumers and the government benefited from reform of the water system in Conakry, Guinea, whose deterioration since independence had become critical by the mid-1980s. Less than 40 percent of Conakrys population had access to piped water - low even by regional standards - and service was intermittent, at best, for the few who had connections. The public agency in charge of the sector was inefficient, overstaffed, and virtually insolvent. In several ways, the reform introduced to the sector in 1989 under a World Bank-led project was remarkable. It showed that even in a weak institutional environment, where contracts are hard to enforce and political interference is common, private sector participation can improve sector performance. The authors discuss the mechanisms that made progress possible and identify factors that inhibit the positive effects of reform. Water has become very expensive, the number of connections has increased very slowly, and conflicts have developed between SEEG (the private operator) and SONEG (the state agency). Among the underlying problems: a) The lack of strong, stable institutions. b) The lack of an independent agency capable of restraining arbitrary government action, regulating the private operator, and enforcing contractual arrangements. c) The lack of adequate conflict resolution mechanisms for contract disputes. d) Weak administrative capacity.

Maladaptation of regulation to hybrid organizational forms

Abstract This paper argues that standard regulatory policies might be inadequate and may even introduce perverse effects when applied to hybrid organizational forms. Using the case of the “certifying system” adopted for several French agricultural products as a benchmark for the discussion, with particular insights provided by the label chicken case, the paper emphasizes the tight coordination process required by the characteristics of the transactions at stake as well as by the necessity to send adequate signals to consumers. However, unadapted regulations tend to misinterpret the resulting contractual arrangement as collusion. This interpretation is challenged here: The form adopted achieves a high degree of efficiency and reduces transaction costs without reducing competition. We conclude that a new approach to regulations may be required, combining two criteria: contestability and remediability.

The Future of New Institutional Economics: From Early Intuitions to A New Paradigm?

The trajectory of institutional economics changed in the 1970s when new institutional economics (NIE) began to take shape around some relative vague intuitions which eventually developed into powerful conceptual and analytical tools. The emergence of NIE is a success story by many measures: four Nobel laureates in less than 20 years, increasing penetration of mainstream journals, and significant impacts on major policy debates. This rapid acceptance is remarkable when we consider that it was divided from birth into distinct schools of thought. What will be the future of NIE? Will it be quietly absorbed by mainstream theory, or will it radically transform neoclassical economics into a new paradigm that includes institutions? To address these questions, we follow the sometimes-bumpy road to NIEs current successes and ponder the challenges that lie ahead.