Hostname: page-component-8448b6f56d-wq2xx Total loading time: 0 Render date: 2024-04-25T06:35:13.569Z Has data issue: false hasContentIssue false
  • English
  • Français

Linking institutions to economic performance: the role of macro-structures in micro-explanations

Published online by Cambridge University Press:  12 April 2012

CYRIL HÉDOIN
CYRIL HÉDOIN*
Affiliation:
Department of Economics, University of Reims Champagne-Ardenne, 57B Rue Pierre Taittinger, 51100 Reims, France
*
*Email: cyril.hedoin@univ-reims.fr
Get access Rights & Permissions [Opens in a new window]

Abstract:

Economists have been investigating the link between institutions and economic performance for several years. While econometric studies of this link have flourished, they are of limited use in understanding the causal mechanisms making some institutions responsible for economic performance. Several works using game theory and akin to the ‘new institutional economics’ have entertained the goal of developing micro-explanations of the institutions–performance link. Because game theory focuses on individuals’ actions and beliefs, game-theoretic studies of institutions are thought to oppose more ‘structuralist’ explanations that downplay the role of individual agents and put more emphasis on the importance of social (or ‘macro’) structures. This paper demonstrates that this claim is misconceived, as the micro-explanations produced by game-theoretic models must assume already existing macro-structures. Institutions produce downward effects, shaping each agent's action. Moreover, in a game-theoretic framework, macro-structures are constitutive of individual agency since, without them, agents would often be unable to choose. I illustrate this claim with the example of Avner Greif's study of the role of cultural beliefs in the economic organisation of medieval societies.

Type
Research Article
Information
Journal of Institutional Economics , Volume 8 , Issue 3 , September 2012 , pp. 327 - 349
Copyright
Copyright © Millennium Economics Ltd 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This article was presented at the ‘Performance and Institutions’ conference, held in Reims, France, on 17 and 18 November 2011. I thank Geoffrey Hodgson for his comments on the previous version of this article. I also thank the two anonymous referees for their valuable remarks which have help to improve the overall quality of the paper. Finally, I am grateful to Sophie Delabruyère for her help to improve the quality of the English. All remaining errors and omissions are mine.

References

Abell, P., Felin, T., and Foss, N. J. (2010), ‘Causal and Constitutive Relations and the Squaring of Coleman's Diagram: Reply to Vromen’, Erkenntnis, 73 (3): 385–391.CrossRefGoogle Scholar
Acemoglu, D. and Robinson, J. A. (2005), Economic Origins of Dictatorship and Democracy, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Alberti, F., Sugden, R., and Tsutsui, K. (forthcoming), ‘Salience as an Emergent Property’, Journal of Economic Behavior and Organization.Google Scholar
Amable, B. (2003), The Diversity of Modern Capitalism, Oxford: Oxford University Press.CrossRefGoogle Scholar
Aoki, M. (2001), Toward a Comparative Institutional Analysis, Cambridge, MA: The MIT Press.CrossRefGoogle Scholar
Arrow, K. J. (1994), ‘Methodological Individualism and Social Knowledge’, AEA Papers and Proceedings, 84 (2): 1–9.Google Scholar
Aumann, R. J. (1976), ‘Agreeing to Disagree’, Annals of Statistics, 4 (6): 1236–1239.CrossRefGoogle Scholar
Aumann, R. J. (1987), ‘Correlated Equilibrium and an Expression of Bayesian Rationality’, Econometrica, 55 (1): 1–18.CrossRefGoogle Scholar
Bacharach, M. (2006), Beyond Individual Choice: Teams and Frames in Game Theory, Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Bates, R. H., Greif, A., Levi, M., and Rosenthal, J.-L. (1998), Analytic Narratives, Princeton, NJ: Princeton University Press.Google Scholar
Binmore, K. (1987), ‘Modeling Rational Players. Part I’, Economics and Philosophy, 3: 179–214.CrossRefGoogle Scholar
Binmore, K. (2008), ‘Do Conventions Need to Be Common Knowledge?’, Topoi, 27: 17–27.CrossRefGoogle Scholar
Chwe, M. S.-Y. (2003), Rational Ritual: Culture, Coordination and Common Knowledge, Princeton, NJ: Princeton University Press.Google Scholar
Clark, G. (2007), ‘Review of Avner Greif's Institutions and the Path to the Modern Economy: Lessons from Medieval Trade ’, Journal of Economic Literature, 45 (3): 725–741.CrossRefGoogle Scholar
Coleman, J. (1990), Foundations of Social Theory, Cambridge, MA: Harvard University Press.Google Scholar
Craver, C. F. and Bechtel, W. (2007), ‘Top-Down Causation Without Top-Down Causes’, Biology and Philosophy, 22 (4): 547–563.CrossRefGoogle Scholar
Cubitt, R. and Sugden, R. (2003), ‘Common Knowledge, Salience and Convention: A Reconstruction of David Lewis’ Game Theory’, Economics and Philosophy, 19 (2): 175–210.CrossRefGoogle Scholar
Durkheim, E. (2004) [1895]), De la division du travail social, Paris: PUF.Google Scholar
Edwards, J. and Ogilvie, S. (2008), ‘Contract Enforcement, Institutions and Social Capital: The Maghribi Traders Reappraised’, CESifo Working Papers, no. 2254, Munich: CESifo.Google Scholar
Elster, J. (1982), ‘Marxism, Functionalism and Game Theory’, Theory and Society, 11 (4): 453–482.Google Scholar
Field, A. J. (1981), ‘The Problem with Neoclassical Institutional Economics’, Explorations in Economic History, 18: 174–198.CrossRefGoogle Scholar
Field, A. J. (1984), ‘Microeconomics, Norms, and Rationality’, Economic Development and Cultural Change, 32 (4): 683–711.CrossRefGoogle Scholar
Gintis, H. (2009), The Bounds of Reason, Princeton, NJ: Princeton University Press.Google Scholar
Glaeser, E., La, R. Porta, Lopez-De-Silanes, F., and Shleifer, A. (2004), ‘Do Institutions Cause Growth?’, Journal of Economic Growth, 9 (3): 271–303.CrossRefGoogle Scholar
Granovetter, M. (1985), ‘Economic Action and Social Structure: The Problem of Embeddedness’, American Journal of Sociology, 91 (3): 418–510.CrossRefGoogle Scholar
Greif, A. (1989), ‘Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders’, Journal of Economic History, 49 (4): 857–882.CrossRefGoogle Scholar
Greif, A. (1993), ‘Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders’ Coalition’, American Economic Review, 83 (3): 525–548.Google Scholar
Greif, A. (1994), ‘Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies’, Journal of Political Economy, 102 (5): 912–950.CrossRefGoogle Scholar
Greif, A. (2006), Institutions and the Path to the Modern Economy. Lessons from Medieval Trade, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Greif, A. (2009), ‘Contract Enforcement and Institutions Among the Maghribi Traders: Refuting Edwards and Ogilvie’, Working Paper, Stanford, CA: Stanford University.Google Scholar
Hedström, P. (2005), Dissecting the Social. On the Principles of Analytical Sociology, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Hedström, P. and Bearman, P. (eds.) (2009a), The Oxford Handbook of Analytical Sociology, Oxford: Oxford University Press.Google Scholar
Hedström, P. and Bearman, P. (2009b), ‘What is Analytical Sociology All About? An Introductory Essay’, in Hedström, P. and Bearman, P. (eds.), The Oxford Handbook of Analytical Sociology, Oxford: Oxford University Press, pp. 3–24.Google Scholar
Hedström, P. and Swedberg, R. (eds.) (1998a), Social Mechanisms. An Analytical Approach to Social Theory, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Hedström, P. and R. Swedberg (1998b), ‘Social Mechanisms: An Introductory Essay’, in Hedström, P. and Swedberg, R. (eds.), Social Mechanisms. An Analytical Approach to Social Theory, Cambridge: Cambridge University Press, pp. 1–31.CrossRefGoogle Scholar
Hodgson, G. M. (2006), ‘What are Institutions?’, Journal of Economic Issues, 40 (1): 2–25.CrossRefGoogle Scholar
Hodgson, G. M. (2007), ‘Meanings of Methodological Individualism’, Journal of Economic Methodology, 14 (2): 211–226.CrossRefGoogle Scholar
Jepperson, R. and Meyer, J. W. (2011), ‘Multiple Levels of Analysis and the Limitations of Methodological Individualisms’, Sociological Theory, 29 (1): 54–73.CrossRefGoogle Scholar
Kim, J. (2005), Physicalism, or Something Near Enough, Princeton, NJ: Princeton University Press.Google Scholar
Lewis, D. (1969), Conventions. A Philosophical Study, Oxford: Wiley-Blackwell.Google Scholar
Morin, E. (2005), Introduction à la pensée complexe, Paris: Seuil.Google Scholar
North, D. C. (1990), Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Paternotte, C. (2010), ‘Being Realistic about Common Knowledge: A Lewisian Approach’, Synthese, 183 (2): 249–276.CrossRefGoogle Scholar
Schelling, T. (1981) [1960]), The Strategy of Conflict, Harvard, MA: Harvard University Press.Google Scholar
Udehn, L. (2001), Methodological Individualism: Background, History and Meaning, London and New York: Routledge.Google Scholar
Vanderschraaf, P. (1998), ‘Knowledge, Equilibrium and Convention’, Erkenntnis, 49 (3): 337–369.CrossRefGoogle Scholar
Vanderschraaf, P. (2010), ‘Review of The Bounds of Reason, Herbert Gintis, Princeton University Press, 2009’, Economics and Philosophy, 27 (1): 88–96.CrossRefGoogle Scholar
Vromen, J. (2010), ‘MICRO-Foundations in Strategic Management: Squaring Coleman's Diagram’, Erkenntnis, 73 (3): 365–383.CrossRefGoogle Scholar