Payments for ecosystem services (PES) have become a popular approach to bring about improved environmental behaviors. When such programs are launched in developing countries, an additional benefit is that they are said to improve incomes for the poor. In this paper, we argue that PES schemes are not ‘market-based’. Indeed, they are not even ‘market-like’. The incentive properties said to be present in such programs are of doubtful efficacy. We suggest that PES schemes are instances of a new class of transaction – the inducing transaction – whose purpose is to make certain resource users the instruments of the desires of others. We relate the success of PES schemes to Veblenian ‘habituation’ and Peircean ‘habit breaking and habit taking’ to suggest that PES schemes face a daunting challenge if they are to bring about durable behavioral changes.

Cooperation is one of the basic elements of social life. It is essential for emergent social phenomena, such as the formation of families, groups, and societies. However, evolutionary forces counter cooperation. The trait of supporting others is dominated by selfish behavior. In the last few decades scientists, in particular biologists, achieved extraordinary progress regarding the question of how cooperation is possible despite of evolutionary forces. This produced an enormous amount of literature. This paper identifies and reviews the known solutions explaining cooperation under evolutionary forces. Using bibliometric methods in combination with extant review articles and traditional reviewing of original literature, it is possible to isolate 11 mechanisms of cooperation under the conditions of evolution. Developing a categorization of the mechanisms according to shared characteristics establishes a fundamental framework for institutional and mechanism design activities. Implications for future research paths are identified, in particular for the mechanism of indirect reciprocity.

Income inequality is often attributed to declines in income mobility following the Great Gatsby curve, but this relationship is of secondary importance in determining the factors of income mobility if one considers that changing rules is more important than changing outcomes under defined rules. Rather, improvements in institutional quality are hypothesized to increase income mobility by allowing entrepreneurs the freedom to pursue their dreams. This paper is the first to empirically analyze the institutional determinants behind entrepreneurship, and their effect on income mobility. The findings from a cross-country analysis suggest that secure property rights and less corruption are associated with less income persistence, leading to higher income mobility, independent of the Great Gatsby effect. This suggests that reducing corruption and protection of property rights increase income mobility through the channels of entrepreneurship.

Although in the Schumpeterian process of entrepreneurial innovations money and financial markets are assumed to affect economic development, Schumpeter does not explicitly study financial evolution and its effects on real dynamics. In order to fill this gap, this article suggests a Minsky-inspired interpretation of Schumpeterian institutional dynamics in monetary terms. It then develops a specific Schumpeterian analysis of the evolution of financial institutions and regulatory mechanisms in the wake of the 2007–08 crisis and points to major consequences of financial innovations on economic stability. It appears that unlike the creative destruction process of entrepreneurial innovations, in a liberalised/deregulated environment financial innovations move banks from their crucial role of financing long-term economic evolution and lead to reckless finance. Thus, financial market dynamics put economies on a destructive path. Such an evolution calls for active and tight rational regulation in order to shape capitalist finance towards more stable and welfare-enhancing strategies.

We use the Economic Freedom Index to characterize the institutions of the Athenian city-state in the fourth century BCE. It has been shown that ancient Greece witnessed improved living conditions for an extended period of time. Athens in the fourth century appears to have fared particularly well. We find that economic freedom in ancient Athens is on level with the highest ranked modern economies such as Hong Kong and Singapore. With the exception of the position of women and slaves, Athens scores high in almost every dimension of economic freedom. Trade is probably highly important even by current standards. As studies of contemporary societies suggest that institutional quality is probably an important determinant of economic growth, it may also have been one factor in the relative material success of the Athenians.

How can we account for the persistence of inefficient policies? To answer that question, this paper focuses on the issue of food and energy subsidies in Egypt. In 2012, over 13 percent of Egyptian GDP – roughly one-third of the overall government spending – was allocated to subsidies of prices of consumer goods including fuels and food. This paper offers an explanation of the resilience of commodity subsidies to reform, which relies on the inability of the government to credibly commit to a reform path. As a dictatorship, Egypt had a small number of veto players, making policy reversals easy. When opened to a competitive political process after 2011, Egypt lacked political groups that could make credible promises about policy changes. The paper provides a discussion of how appropriately designed reforms can mitigate the lack of credibility.

We applaud the effort of Schubert and Cordes (2013, this journal) to contribute a model describing the social mediation of preferences and to apply their results to the more general context of economic welfare. Although we consider this topic to be of utmost importance and interest, we have found a problem in Schubert and Cordes’ argument that renders their statements in Section 3 invalid. After providing some basic intuition on the problem at hand, we present a short proof showing that the assumptions of the model always lead to a stable society. We also report on an interesting non-linear segregation effect that can occur within the Schubert-Cordes model.

In their comment “Modeling the evolution of preferences: an answer to Schubert and Cordes” (2013, this journal), Kapeller and Steinerberger claim to have identified some flaws in the formal argument developed in our paper “Role models that make you unhappy: light paternalism, social learning, and welfare” (2013, this journal). Specifically, they maintain that there is no runaway dynamic in consumption and preference values and that our model therefore always leads to a stable society. In their proof, Kapeller and Steinerberger show that their system is bounded by the highest and lowest preference and consumption levels in the population and can never escape them. Their argument does, however, not apply to the system of coupled dynamic equations we employed to model runaway consumption.