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Toward a Comparative Institutional Analysis

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Markets are one of the most salient institutions produced by humans, and economists have traditionally analyzed the workings of the market mechanism.

Recently, however, economists and others have begun to appreciate the many institution-related events and phenomena that have a significant impact on economic performance. Examples include the demise of the communist states, the emergence of Silicon Valley and e-commerce, the European currency unification, and the East Asian financial crises.In this book Masahiko Aoki uses modern game theory to develop a conceptual and analytical framework for understanding issues related to economic institutions. The wide-ranging discussion considers how institutions evolve, why their overall arrangements are robust and diverse across economies, and why they do or do not change in response to environmental factors such as technological progress, global market integration, and demographic change.

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What People Are Saying

From the Publisher
"Good economic theory mixes rigorous mathematical reasoning with intuitive motivations and stories, which can make the task of presenting or evaluating cutting-edge research a treacherous balancing act. In this one-of-a-kind essay, Thomson offers an armful of good advice and tricks of the trade to economists young and old, lest any of them forget that a bad container can spoil its contents."—Hervé Moulin, George Peterkin Professor of Economic Theory, Rice University, and Editor of Mathematical Social Sciences

"In this book Professor Aoki does a remarkable job of animating recent developments in the theory of contracts and institutions. This theory is used to explain the form and structure of diverse institutions, ranging from the regulation of irrigation systems in Tokugawa Japan to the rise of Silicon Valley. This book is an astounding achievement that is sure to become a classic."—W. Bentley MacLeod,Professor of Economics and Law, University of Southern California

"This book has an outstanding intellectual sweep, covering game theory and abstract economics on the one hand, and a wide diversity of anthropological examples and illustrations from the real world, on the other."—Kaushik Basu,Professor of Economics and Carl Marks Professor, Cornell University

"This volume presents the results of decades of imaginative research by Fields on the most critical set of issues in development today. Distribution and Development goes beyond examining the relationship between growth and distribution to include the burgeoning concern with poverty alleviation, as well as such innovative topics as income mobility and economic well-being. An excellent text for advanced undergraduate and graduate students."—Gustav Ranis, Frank Altschul Professor of International Economics, Yale University

"If the new institutional economics is to realize its promise, it must go beyond the description, insights, and hypotheses so far developed and turn them into a systematic theoretical framework. Masahiko Aoki's Towards a Comparative Institutional Analysis takes us a long way in doing just that."—Douglass C. North,Department of Economics, University of Washington St. Louis

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Product Details

  • ISBN-13: 9780262011877
  • Publisher: MIT Press
  • Publication date: 11/30/2001
  • Series: Comparative Institutional Analysis
  • Edition description: New Edition
  • Pages: 560
  • Product dimensions: 7.00 (w) x 9.00 (h) x 1.25 (d)

Meet the Author

Masahiko Aoki is Henri H. and Tomoye Takahashi Professor of Japanese Studies in the Department of Economics at Stanford University.

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Table of Contents

1 What Are Institutions? How Should We Approach Them? 1
1.1 Three Views of Institutions in a Game-Theoretic Perspective 4
1.2 Aspects of Institutions: Shared Beliefs, Summary Representations of Equilibrium, and Endogenous Rules of the Game 10
1.3 Organization of the Book 21
2 Customary Property Rights and Community Norms 35
2.1 Customary Property Rights as a Self-organizing System 35
2.2 Community Norms as a Self-enforcing Solution to the Commons Problem 43
App History versus Ecology as a Determinant of a Norm: The Case of Yi Korea 55
3 The Private-Ordered Governance of Trade, Contracts, and Markets 59
3.1 Traders' Norms 62
3.2 Cultural Beliefs and Self-enforcing Employment Contracts 68
3.3 Private Third-Party Governance: The Law Merchant 73
3.4 Moral Codes 76
3.5 Overall Market Governance Arrangements 78
Appendix Money as an Evolutive Convention 91
4 Organizational Architecture and Governance 95
4.1 Organizational Building Blocks: Hierarchical Decomposition, Information Assimilation, and Encapsulation 98
4.2 Types of Organizational Architecture 106
4.3 Governance of Organizational Architecture: A Preliminary Discussion 118
5 The Co-evolution of Organizational Conventions and Human Asset Types 129
5.1 Types of Mental Programs: Individuated versus Context-Oriented Human Assets 131
5.2 The Evolutionary Dynamics of Organizational Conventions 135
5.3 The Interactions of Organizational Fields and Gains from Diversity 140
5.4 The Relevance and Limits of the Evolutionary Game Model 147
6 States as Stable Equilibria in the Polity Domain 151
6.1 Three Prototypes of the State 153
6.2 Various Forms of the Democratic and Collusive States 160
7 A Game-Theoretic Concept of Institutions 185
7.1 Exogenous Rules of the Game and Endogenous Action-Choice Rules 186
7.2 The Institution as a Summary Representation of an Equilibrium Path 197
7.3 Feedback Loops of Institutionalization 202
8 The Synchronic Structure of Institutional Linkage 207
8.1 Social Embeddedness 208
8.2 Linked Games and Institutional Linkages 213
8.3 Institutional Complementarity 225
9 Subjective Game Models and the Mechanism of Institutional Change 231
9.1 Why Are Overall Institutional Arrangements Enduring? 233
9.2 Subjective Game Models and General Cognitive Equilibrium 235
9.3 The Mechanism of Institutional Change: The Cognitive Aspect 239
10 Diachronic Linkages of Institutions 245
10.1 Overlapping Social Embeddedness 247
10.2 The Reconfiguration of Bundling 260
10.3 Diachronic Institutional Complementarity 267
11 Comparative Corporate Governance 279
11.1 Governance of the Functional Hierarchy 282
11.2 Codetermination in the Participatory Hierarchy 287
11.3 Relational-Contingent Governance of the Horizontal Hierarchy 291
12 Types of Relational Financing and the Value of Tacit Knowledge 307
12.1 A Generic Definition of Relational Financing and Its Knowledge-Based Taxonomy 310
12.2 The Institutional Viability of Relational Financing 314
13 Institutional Complementarities, Co-emergence, and Crisis: The Case of the Japanese Main Bank System 329
13.1 The Main Bank Institution as a System of Shared Beliefs 331
13.2 Institutional Emergence: Unintended Fits 333
13.3 Endogenous Inertia, Misfits with Changing Environments, and a Crisis of Shared Beliefs 340
14 Institutional Innovation of the Silicon Valley Model in the Product System Development 347
14.1 Information-Systemic Architecture of the Silicon Valley Model 349
14.2 The VC Governance of Innovation by Tournament 360
14.3 Norms and Values in the Silicon Valley Model 366
Appendix The Stylized Factual Background for Modeling 371
15 Epilogue: Why Does Institutional Diversity Continue to Evolve? 377
15.1 Some Stylized Models of Overall Institutional Arrangements 377
15.2 Self-organizing Diversity in the Global Institutional Arrangement 386
Notes 395
References 433
Index 457
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