Institutional economics and discourse theory stand unconnected next to each other, in spite of the fact that they both ask for the legitimacy of institutions (normative) and the functioning and effectiveness of institutions (positive). Both use as theoretical constructions rational individuals and the concept of consensus for legitimacy. Whereas discourse theory emphasizes the conditions of a legitimate consensus and could thus enable institutional economics to escape the infinite regress of judging a consensus legitimate, institutional economics has a tested social science (...) paradigm (rational choice) of explaining and predicting the functioning of institutions. The article outlines a theoretical synthesis of the two theories by finding points in common and possibilities of fruitful combinations concerning the problem of legitimacy, institutional design and effectiveness of legal norms. Key Words: consensus • discourse theory • effectiveness of legal rules • institutional design • legitimacy • new institutional economics. (shrink)

The strengths and weaknesses of federalism have been debated for centuries. But one major possible advantage of building decentralization and limited government into a constitution has been largely ignored in the debate so far: its potential for reducing the costs of widespread political ignorance. The argument of this paper is simple, but has potentially important implications: Constitutional federalism enables citizens to “vote with their feet,” and foot voters have much stronger incentives to make well-informed decisions than more conventional ballot box (...) voters. The informational advantage of foot voting over ballot box voting suggests that decentralized federalism can increase citizen welfare and democratic accountability relative to policymaking in a centralized unitary state.Ballot box voters have strong incentives to be “rationally ignorant” about the candidates and policies they vote on because the chance that any one vote will have a decisive impact on an electoral outcome is vanishingly small. For the same reason, they also have little or no incentive to make good use of the information they do possess. By contrast, “foot voters” choosing a jurisdiction in which to reside have much stronger incentives to acquire information and use it rationally; the decisions they make are individually decisive. (shrink)

Alliances and other forms of cooperation between firms often promise great benefits, for example, by the exchange of knowledge or co-specialization of resources. At the same time, the necessary actions to realize these benefits can augment vulnerability to opportunistic behaviour of partners. In addition to formal contracts to mitigate the resulting behavioural uncertainties, often, mechanisms, such as reputation or ethical values, are suggested as important supplements. However, when it comes to assessment of a specific cooperation opportunity, it is difficult to (...) account systematically for the economic consequences of these 'softer factors'. Therefore, this paper aims to surpass mere financial analysis of chance and risk and to integrate systematically both reputation and ethical values into an economic assessment of cooperative relationships. For this purpose, we develop a theoretical framework that is based on a simple-decision model to account for reputation and ethical values of potential partners as drivers of behavioural uncertainty reduction. We also discuss how this framework can be used to assess cooperative relationships and illustrate these ideas with reference to the inter-organizational accounting practices of a large drugstore chain and its suppliers. (shrink)

Alliances and other forms of cooperation between firms often promise great benefits, for example, by the exchange of knowledge or co‐specialization of resources. At the same time, the necessary actions to realize these benefits can augment vulnerability to opportunistic behaviour of partners. In addition to formal contracts to mitigate the resulting behavioural uncertainties, often, mechanisms, such as reputation or ethical values, are suggested as important supplements. However, when it comes to assessment of a specific cooperation opportunity, it is difficult to (...) account systematically for the economic consequences of these ‘softer factors’. Therefore, this paper aims to surpass mere financial analysis of chance and risk and to integrate systematically both reputation and ethical values into an economic assessment of cooperative relationships. For this purpose, we develop a theoretical framework that is based on a simple‐decision model to account for reputation and ethical values of potential partners as drivers of behavioural uncertainty reduction. We also discuss how this framework can be used to assess cooperative relationships and illustrate these ideas with reference to the inter‐organizational accounting practices of a large drugstore chain and its suppliers. (shrink)

F.A. Hayek’s theory of cultural evolution has often been regarded as incompatible with his earlier works. Since it lacks an elaborated theory of individual learning, we try to back his arguments by starting with his thoughts on individual perception described in his Theory of Mind. With a focus on the current discussion concerning biological and cultural selection theories, we argue his Theory of Mind leads to two different stages of societal evolution with well-defined learning processes, respectively. The first learning process (...) describes his Morality of Small Groups, in which Hayek’s thoughts coincide with learning theories that do not allow for the perception of behavior from outside the group. His second stage of cultural evolution, the Open Society, involves a different kind of learning behavior. We connect this notion with a model of local interaction in which the cultural learning aspect is addressed by a distinction between interaction and learning neighborhoods. This results in a situation in which individuals change their strategy and —depending on the radius of interaction and learning neighborhood—eventually may adopt new strategies that lead to higher payoffs. (shrink)

Many analytical studies purporting to aid decision-making are produced and yet their contribution to actual decision-making is questioned. This article focuses on how institutional structures influence the way analytical information is actually used. A variation of information criterion for quality of decision-making is developed and used to analyze what types of structures incite actors to both generate and store a variety of ideas and arguments. An international comparison on transport infrastructure planning is used to demonstrate the relevant institutional mechanisms and (...) how different structures lead to different processes of information exchange and to differing product outcomes. (shrink)

This paper argues that there is a need to move yet further than has already been suggested by some from the individual to the collective as a base for public health. A communitarian approach is one way to achieve this. This has the advantage of allowing not only the community’s voice to have a say in setting the values for public health but also more formally the development of a constitution on which public health might then be built. It also (...) sees public health as a social institution which can be valued in its own right. (shrink)

In this article we argue that puzzle of tax compliance can be explained, at least in part, by recognizing the typically neglected role of ethics in individual behavior; that is, individuals do not always behave as the selfish, rational, self-interested individuals portrayed in the standard neoclassical paradigm, but rather are often motivated by many other factors that have as their main foundation some aspects of “ethics.” We argue that it is not possible to understand fully an individual’s compliance decisions without (...) considering in some form these ethical dimensions. Specifically, we argue here that there is much direct and indirect evidence that ethics differ across individuals and that these differences matter in significant ways for their compliance decisions. We then put this in the larger context of the inability of the standard neoclassical paradigm to explain compliance of at least some individuals, and we suggest several possible avenues by which theory can be expanded to incorporate ethics. We conclude by arguing that a full house of compliance strategies is needed to combat tax evasion, strategies that include the traditional “enforcement” paradigm suggested by and consistent with neoclassical theory, a less traditional “service” paradigm that recognizes the important role of a “kinder and gentler” tax administration in encouraging compliance, and, importantly, a new “trust” paradigm that is built on the foundation of ethics, in which the tax administration must recognize that it can erode the ethics of taxpayers by its own decisions. (shrink)

NASA has released an account of the agency's plans for a mission to Mars. Private organizations, like SpaceX, too have expressed a goal to visit or, in some cases, even establish settlements on Mars. Yet the prospect of establishing settlements, that is, colonizing - as opposed to simply exploring - raises a number of issues. The focus of this study is on the emergence of institutions and organizations on an extraterrestrial planet like Mars. Specifically, the thesis will explore the conscious (...) design of organizations and institutions of collective action, from the Constitutional Political Economy perspective. (shrink)