Social Economics and Evolutionary Institutionalism Today

This paper discusses theoretical and methodological elements that constitute social economics. It also considers those elements for evolutionary (Veblenian) institutional economics. It investigates how these “heterodoxies” may further converge. Such convergence would probably not trigger a complete unification, but lead to a broadly defined common research program and a strategy for joint “heterodox” survival, in face of the ranking game of the neoclassical “mainstream” and of the dominant powers supporting it as the discipline providing ideological legitimization. A common denominator of “heterodoxies” in terms of real-world orientation, direct interdependency and interaction of agents (social decision situations), appropriate complexity, and the treatment of values is drafted. Theoretical concepts discussed include complex and open systems, individual agency, institutions, embeddedness, networks, social reform, and process orientation. Formal methodological developments considered are complex modeling, game theory, or computer simulations. We arrive at a more formal common basis, which we term socio-economics. We also consider the relations of evolution and institutions, the institutional dichotomy, and the theory of institutional change. The monism of the “market” of the “mainstream” turns out to dissolve into the institutional diversity of real-world network forms, which helps explaining real-world forms of markets, hierarchies, or spatial clusters. Focuses of “heterodox” convergence will have to be the related “microfoundations” and “macrofoundations” projects, integrating an interdisciplinary “naturalistic” approach to genetic-cultural co-evolution of cooperation, and social reform. While modern socio-economics makes “heterodoxies” leading in economic research, their future still appears open between ideological cleansing and extinction through the mainstream, and proactive paradigmatic pluralism.     

WINDOW GUIDANCE BY THE BANK OF JAPAN: WAS LENDING CONTROLLED?

Over the period 1961–1991, the Bank of Japan (BOJ) attempted to directly control the volume of commercial bank credit by providing lending targets for selected banks. This policy of “window guidance” (WG) applied to only a subset of lending institutions. The guided banks involved were under no legal obligation to heed the BOJ's requests. Using actual WG data to city banks, two questions are addressed. First, did city banks comply with WG (the “compliance hypothesis”)? Second, was WG successful in controlling economywide lending or did lending adjustments by other financial institutions simply displace the lending of guided banks (the “displacement hypothesis”)? The empirical results show a high degree of compliance in the first two decades of the program and evidence of weakening in the final years. The displacement hypothesis is rejected, particularly in the early period of highly regulated financial markets. (JEL E58, E51, E52)     

Old (Chicago) school,new century: the link between Knight and Simons’ Chicago plan to Buchanan’s constitutional money

James Buchanan had long been a champion of the early Chicago school’s emphasis on the essential role that institutions play in framing the market process. In his post-2009 analysis of the financial crisis, Buchanan echoed his old Chicago mentors like Frank Knight and Henry Simons in arguing that the Great Recession, like all previous financial crises, was primarily a failure of the rules governing our monetary-financial system. This “old Chicago” emphasis on the institutional “rules of the game” formed the basis of his essential post-2009 argument that the financial crisis fundamentally represented not a market failure, per say, but a constitutional failure. In this paper, I connect the dots in Buchanan’s post-2009 analysis of the Great Recession and his reaffirmation of the need for “constitutional money” to his old Chicago mentor’s strikingly similar calls for a radical restructuring of the monetary-financial system in the Chicago Plan of the 1930s. Though Buchanan’s twenty-first century resurrection of these ideas has yet to conjure up the academic support of his predecessors, certain elements of his “old school” monetary-financial reforms have experienced a strong revival since the financial crisis, as has Buchanan’s more general call to “constitutionalize money.”     

The nexus of economic and institutional evolution

The current state of the development economics literature ascribes an indisputable central role to institutions. This paper presents a formal model of institutional evolution that is based on the dynamic interactions between formal and informal institutions and economic development; the main features of the model is consistent with the fundamental theories that shed light to institutional evolution, namely the collective action and transaction cost theories, as well as dialectics. As informal institutional quality accumulates like technological know-how, while the level of formal institutional quality is chosen by the government to maximize welfare, subject to the economic and political costs. The solution of the model yields a punctuated trajectory of formal institutional evolution. Simulations reveal that the extent of diversity in informal institutional quality across a country delays formal institutional reforms. We also observe that, both the optimal quality of formal institutions and welfare are higher the more homogeneous is the country with respect to its informal institutions or the cultural attributes.     

Strategic interaction in undeveloped credit markets

This paper studies the strategic interaction between informal and formal lenders in undeveloped credit markets. In a model with adverse selection, loan seniority, market power, and differences in the cost of lending, it is shown that under general conditions a co-funding equilibrium will be a Nash outcome of the game. We demonstrate that a collateral requirement in connection with formal loans always generates a new co-funding equilibrium in which both lenders earn higher profits. A government subsidy to the formal lender may have the opposite effect. We relate our results to existing empirical evidence and the emerging discussion of how to best ensure financial viability and outreach of microfinance institutions.     

我国三十年来农村地区金融改革的逻辑轨迹——基于新比较经济学分析框架的研究

文章基于新比较经济学的分析框架,从正规金融和非正规金融两个方面来论述三十年来中国农村地区金融改革的基本逻辑。研究认为,农村金融发展滞后于农村经济发展的原因是政府对农村金融的控制方式不尽合理。文章充分肯定了国家2005年至今的改革措施,认为新型金融机构的引进将成为建立完善的农村金融体系的契机。     

信息、非正规金融与中小企业融资

各种形式的非正规金融在发展中国家和地区广泛存在。本文认为,由于中小企业信息不透明,且常常不能提供充分的担保或抵押,正规金融机构难以有效克服信息不对称造成的逆向选择问题,而非正规金融则在收集关于中小企业的“软信息”方面具有优势。这种信息优势是非正规金融广泛存在的根本性原因,金融抑制只是一个强化因素,同时非正规金融市场的各种特征也都源于其存在的根本逻辑。本文构建了一个包括异质的中小企业借款者和异质的贷款者(具有不同信息结构的非正规金融和正规金融部门)的金融市场模型,证明非正规金融的存在能够改进整个信贷市场的资金配置效率。     

社会地位会影响企业融资约束吗?——来自A股民营上市公司的经验证据

本文从企业的社会性对经济性行为影响的视角研究社会地位对民营企业融资约束的影响。以2009—2018年沪深A股民营上市公司为研究样本,研究发现社会地位越高的企业面临的融资约束程度越小。将企业所在地区的市场化程度以及企业高管的金融背景纳入考虑之后,研究发现相比于市场化程度较高的地区,在市场化程度较低地区,社会地位缓解企业融资约束的效果更为显著;相较于拥有金融关联的企业,没有金融关联的企业提升社会地位更有利于缓解融资约束。且进一步研究发现,在市场化程度较低地区,没有金融关联的企业社会地位缓解融资约束的效果最为显著。这些结论不仅拓展了企业"社会属性"对其"经济性"行为的影响研究,而且能够为民营企业缓解融资约束提供有益借鉴,尤其是处在市场化程度不高地区,且不存在金融关联的民营企业。     

Trust,cultural norms and financial institutions in rural communities: the case of Cameroon

The success of the operations of formal and informal financial institutions (IFIs) hinges on a high degree of trust. The pivotal role of trust warrants careful analysis regarding its formation in these financial institutions. Using the case of Cameroon, the paper interrogates trust development between formal financial institutions and their clients, and between IFIs and their members. Trust formation occurs via certain cognitive trust-building processes: calculative, prediction, intentionality, capability, and transference processes. The paper argues that trust formation through these processes is predicated upon cultural values and beliefs. It is precisely because of cultural norms that traditional leaders play a role in ensuring that loans granted by formal financial institutions are repaid, thereby serving as principal actors in the functioning of financial capitalism in rural areas. The interplay between culture and financial institutions reconfigures the financial architecture in rural zones. Culture creates a social relational anthropology that is significant for how financial institutions operate.     

农业补贴对农村金融市场的“挤出效应”——理论分析与实证检验

针对我国农村金融机构年贷款增长率远低于政府农业年度补贴增长率的现实,本文构建一个理论分析框架,并基于农户调研数据进行实证分析。研究发现,农业补贴依次对非正规金融市场和正规金融市场形成挤出效应;政府提高贷款利息虽可压缩非正规金融市场的生存空间,但却会引致农户福利流失;非挂钩性农业补贴会强化(弱化)非正规金融市场(正规金融市场)的挤出效应。因而,政府不应单一地寄希望于制度创新,而应更多地关注农业补贴对农户借贷决策行为的影响。     

The effect of political volatility on capital markets in EU accession and neighborhood countries

Political instability has the potential to disrupt financial markets. But how do political institutions affect financial movements in an environment where all institutions are in flux? This paper looks at the effects of formal and informal political volatility in the new EU countries of central and eastern Europe, in the Eastern Neighborhood, and farther afield in Central Asia to answer this question. Using asymmetric GARCH modeling on monthly data, I find that informal political volatility has a significant negative effect on stock returns, while formal political institutions generate much higher financial volatility than changes in monetary policy.     

Limits of the New Institutional Economics Approach to African Development

In the last two decades, there has been a marked shift in the research on Sub-Saharan Africa from standard neoclassical analysis to new institutional economics (NIE). The increasing emphasis on NIE is reflected in a wide range of works by international financial institutions and scholars. However, the NIE approach retains fundamental limitations due to its narrow interpretation of institutions, its over-reliance on analysis of transactions costs and property rights, and its ahistorical attachment to markets and private sector firms as major engines of development. Furthermore, NIE typically fails to look “inside institutions” to identify the complex cultural factors that shape the interests and behaviors of the members of institutions. This paper engages in a critique of NIE analysis of Sub-Saharan Africa’s economic development, and suggests the need for a nuanced analysis of property rights and culture, along with development programs to address inequality and poverty and to foster state-led development.     

Solving the U.S. Trade Deficit and Competitiveness Problem

We compare the analytical approach of John R. Common and Ronald H. Coase to institutional analysis and social provisioning. In particular, we examine their similarities in (i) the definition and role of institutions in the economy, (ii) the allocative (social provisioning) role of institutions in the economy, and (iii) the inescapable and unchanging role of institutions in shaping the social provisioning process. We contend that Commons and Coase had more in common than did Coase and many of his followers in the “new institutional economics.” In particular, the two had strong similarities in both (a) their insights into the nature of institutions in the legal-economic nexus that is the foundation of the economy and (b) their methods for conducting economics research. Because this role of institutional evolution is, as Warren Samuels noted, an inescapable and unchanging part of an economy’s social provisioning process, it will remain an integral part of any such work in the future, regardless of the “school of analysis” or methodological approach.     

The Stories That Economists Tell: Mainstream,Hyman Minsky,and Institutional Views of Consumer Behavior

The financial crisis of 2008 provided an informal test of mainstream and institutional views of consumer behavior. The test posed by the financial crisis assumes the form of a “story.” A successful story provides a reasonably coherent explanation of events, confirming our beliefs and justifying our policies. First, the article examines the failure of mainstream economics to present a coherent story of consumer behavior. Ignoring the relevance of assumptions, as Milton Friedman advocated, leads economists to hypostasize the model, filtering information central to the crisis. Second, Minsky’s discussion of consumer behavior and its effect on cash inflows to businesses represents an institutional explanation regarding why John Maynard Keynes’s long-run vision did not occur. The third section expands on some of the themes addressed by Minsky, which are found among the contributions of institutional economists, focusing on efforts to mold institutions to increase cash inflows to corporations and protect those inflows.     

An Alternative Approach to the Institutional Economics of the Eurozone Crisis

I argue that the Eurozone crisis is neither a crisis of European sovereigns in the sense of governmental over-borrowing, nor a crisis of sovereign debt market over-lending. Rather, it is a function of the “sovereign debt market” institution itself. Crisis, I argue, is not an occurrence, but an element fulfilling a precise technical function within this institution. It ensures the possibility of designating — in the market’s day-to-day mechanisms rather than analytical hindsight — normal (tranquil, undisturbed) market functioning. To show this, I propose an alternative view on the institutional economics of sovereign debt markets. First, I engage literature on the emergent qualities of the institutions “market” and “firm” in product markets, concluding that the point of coalescence for markets is the approximation of an optimal observation of consumer tastes. I then examine the specific institution “financial markets,” where the optimal observation of economic fundamentals is decisive. For the specific sub-institution “sovereign debt market,” I conclude that the fundamentals in question — country fundamentals — oscillate between a status of observable fundamentals outside of markets and operationalized fundamentals influenced by market movements. This, in turn, allows me to argue that the specific case of the Eurozone crisis is due to neither of the two causes mentioned above. Rather, the notion of “crisis” takes on a technical sense within the market structure, guaranteeing the separation of herd behavior and isomorphic behavior on European sovereign debt markets. By the same token, the so-called Eurozone crisis ceases to be a crisis in the conventional sense.     

Explaining informal payments for health services in Central and Eastern Europe: an institutional asymmetry perspective

The aim of this paper is to propose and evaluate a new institutional theory explanation for patients making informal payments for health services in Central and Eastern Europe. This views informal payments by patients to healthcare professionals as arising when formal institutional failures lead to an asymmetry between the laws and regulations of formal institutions and the unwritten rules of informal institutions. Reporting a 2013 Eurobarometer survey of the prevalence of informal payments by patients in Central and Eastern European countries, a strong association is revealed between the level of asymmetry between the formal and informal institutions, and the propensity to make informal payments. The association between informal payments and various formal institutional imperfections is then explored to evaluate which structural conditions might reduce this institutional asymmetry, and thus the propensity to make informal payments. The paper concludes by exploring the implications for tackling such informal practices.     

湖南省金融发展与经济增长的ECM模型分析

金融发展与经济增长的关系是经济学的一个重要研究领域。选取1982—2008年为时间段,以湖南省为例对金融发展与经济增长的关系进行了实证研究,结果表明湖南省信贷存量、其他金融机构发展（除银行）与经济增长呈正相关关系,而货币存量与经济增长呈负相关关系。经济增长是其他金融机构发展的短期格兰杰原因,而存贷存量在长期上是经济增长的格兰杰原因。     

Complexity Economics as Heterodoxy: Theory and Policy

Complexity economics has quickly become a powerful research program for real-world economics in recent years. This article provides an overview of complexity economics, and argues that it is incompatible with the “equilibrium” and “optimality” conceptions of the mainstream and its “market economy.” Instead, it develops older heterodox — including evolutionary-institutional — issues like self-organization, emergence, path?dependence, idiosyncrasies, lock-ins, or skewed power distributions. Also, the space for emergent institutions through the “intentionality” of agents, including their improving collective performance, reducing complexity, and others, is investigated. This article considers complex adaptive systems through “games on networks” in an “evolution-of-cooperation” perspective. Moreover, a surge in policy implications of economic complexity has emerged, even if still rather general. With some more specific implications derived, the article again reveals the close similarities with long-standing heterodoxies: namely, pragmatist policy conceptions in this respect.     

Rio plus Ten: Politics,Poverty, and Environment

The purpose of this paper is to contrast the work of Douglass North and Karl Polanyi regarding financial institutions associated in market economies. Both implicitly acknowledge the synergy between public and private financial markets, which can serve to solidify an alliance between wealth holders and the state, potentially at the expense of “sociery” at large. This alliance may stimulate growth, according to North, as well as impose the strain of the market, according to Polanyi. Taken together, these insights undercut the classical story of the neutral role of money, as well as the notion of a clear distinction between public and private, politics and markets.