By declaring an item legal tender or making it publicly receivable, governments might generate sufficient demand to determine the medium of exchange. How do private actors launch a new money? There are two views in the literature. The first requires offering an item with a use value to some agents that is distinct from its role as a medium of exchange. The second suggests that agents might coordinate on an intrinsically useless item. With these views in mind, I survey the logs from the original bitcoin forum, bitcoin-list. I find that early participants in the bitcoin community understood the importance of coordination and took steps to coordinate users.

Definitions are crucial for institutional analysis. This article explains the nature of taxonomic definitions, with particular attention to their use in economics and other social sciences. Taxonomic definitions demarcate one species of entity from another. They are vital for the communication of meaning between scientists, who must share some basic conception of what types of entity they are investigating, to establish a division of labour over subsequent theoretical analysis and empirical investigation of the type of entity defined. Generally, taxonomic definitions build on past usage and are parsimonious: they are not meant to be explanations or descriptions. By contrast, overloaded taxonomic definitions can create square-one disagreement about what is being investigated. As illustrative examples, the paper considers different degrees of progress with attempts to define firms, markets and institutions.

We analyse how institutional complementarities between employee representation laws and dismissal restrictions influence aggregate innovation outcomes. We argue that greater employee voice, due to improved employee representation legislations, may spur innovative effort by employees only when shareholders cannot renegotiate ex-ante agreements with workers over revenue sharing, by threatening dismissal. We perform a panel regression analysis, exploiting country-sector panel data over the 1977–2005 period, and find that stronger employee representation laws in the presence of stricter firing restrictions are in fact associated with higher patenting activity. Consistently with our theoretical argument, the magnitude of this empirical relationship is seen to be relatively larger in those sectors where the human capital contribution to production is higher. Implications for the analysis of economic institutions and for legal policy making are proposed.

We experimentally investigate whether and how individuals change formal institutions governing an organization. The focus is on formal rules prescribing individual cooperation to achieve a collective goal. Our analysis accounts for the role of social norms and individuals’ social values. We observe that prosocial individuals –who value cooperation and have a conflict between this value and existing rules allowing for low cooperation– attempt to change this rule. In line with our theoretical discussion, we also find that prosocial individuals first try to change the institutional environment by changing social norms. If this fails, these individuals change formal rules directly.

Nobel Laureate in Economic Sciences Elinor Ostrom's authoritative book Governing the Commons, published in 1990, and almost every other text she has published on the subject of the commons, strongly criticized Garrett Hardin's much-cited 1968 Science article “The Tragedy of the Commons.” Hardin's “tragedy” refers metaphorically to the eventual destruction of a commons as a result of collective overuse. Hardin claimed that statist solutions and privatization provisions are the only two policy means for addressing the tragedy. Ostrom explored user self-governance as a third alternative to avert the tragedy. Ostrom's exploration and her critical stance, however, have caused the misperception of her work as anti-Hardin, anti-tragedy, or more specifically, anti-statist and anti-privatization. This paper argues that despite Ostrom's clear criticism of Hardin's claim and her regard for user self-governance or community-based management, her work was not anti-statist or anti-privatization.

We develop a framework for understanding how legal structures relate to imprisonment. We hypothesize that relatively more hierarchy within criminal justice institutions, compared to commercial law, fosters higher rates of incarceration. Our framework predicts that incarceration reflects asymmetric opportunities for rent seeking across differently organized legal institutions. Instead of comparing criminal justice institutions across nations in absolute terms, we investigate the relative degrees of institutional centralization across legal spheres. To provide support, we document the separate historical experiences that shaped divergent organizations across England and France. Within each country, criminal legal institutions developed inverse organizational traits from commercial legal processes. As a result, the contrasting organizations created asymmetric opportunities for rent seeking. Divergent contemporary outcomes can be understood by recognizing these initial organizational choices, the relative opportunities they created, and their subsequent path dependencies. We document contemporary England, France, and the United States’ incarceration trends and penal outcomes to provide empirical support.

Along with introducing democracy, advancing philosophy and excelling at the arts, during the period 800–300 bce ancient Greece achieved substantial economic prosperity. Recent literature attributes the efflorescence to the institutions and culture of democratic city-states. However, the city-states failed to initiate sustained growth. Technological progress remained slow and the economic efflorescence ended after the prevalence of Macedon and the subsequent Roman conquest. The present study scrutinises the roles of city-state institutions and culture. It shows that ultimately ancient Greece could not sustain long-run growth because a multitude of independent small city-states prevented the exploitation of economies of scale and stoked continual wars that exhausted them financially and militarily, and because of a culture valuing landholding, self-sufficiency and collectivist attitudes.

A central aspect of institutional development in developing economies is building tax systems capable of raising revenues from broad tax bases, i.e. fiscal capacity. While it is recognised that fiscal capacity is pivotal for state building and economic development, it is less clear what its origins are and what explains its cross-country differences. We focus on political institutions, seen as stronger systems of checks and balances on the executive. Exploiting a recent database on public sector performance in developing economies and an IV strategy, we estimate their long-run impact, distinguishing between the accountability and transparency of fiscal institutions (impartiality) and their effectiveness in extracting revenues. We find that stronger constraints on the executive foster the impartiality of tax systems. However, there is no robust evidence that they also improve its effectiveness. Our findings also suggest that the overall impact on both total tax revenues and income tax is economically relevant.