Experience is a major source of knowledge. Could institutions be improved by eliciting the additional knowledge held by experienced individuals? I show here that in several areas of the law experienced individuals are more critical of institutional quality than inexperienced individuals. Moreover, performance indexes built with experienced subsamples substantially alter country rankings. Assuming no unmeasured confounders, more knowledge arguably leads experienced individuals to revise the more benign view held by the general population, composed mostly of inexperienced individuals. Moreover, experience is a stronger driver than alternative sources of knowledge, including education, which might therefore be reinforcing milder and, arguably, incorrect assessments of institutional quality. After observing how this ‘experience effect’ varies systematically across countries, I conclude by proposing that evaluations of institutional quality pay greater attention to experienced individuals and cautioning against basing inferences on assessments made by the general population.

Inspired by comments made by Allen (2017), Lueck (2017), Ménard (2017) and Smith (2017), this response clarifies and deepens the analysis in Arruñada (2017a). Its main argument is that to deal with the complexity of property we must abstract secondary elements, such as the physical dimensions of some types of assets, and focus on the interaction between transactions. This sequential-exchange framework captures the main problem of property in the current environment of impersonal markets. It also provides criteria to compare private and public ordering, as well as to organize public solutions that enable new forms of private ordering. The analysis applies the lessons in Coase (1960) to property by not only comparing realities but also maintaining his separate definition of property rights and transaction costs. However, it replaces his contractual, single-exchange, framework for one in which contracts interact, causing exchange externalities.

The contractual, single-exchange framework in Coase (1960) contains the implicit assumption that exchange in property rights does not affect future transaction (i.e., trading) costs. This is pertinent for analyzing use externalities but limits our understanding of property institutions: A central problem of property markets lies in the interaction among multiple transactions, which causes exchange-related and non-contractible externalities. By retaining a single-exchange simplification, the economic analysis of property has encouraged views that: overemphasize the initial allocation of property rights, while some form of recurrent allocation is often needed; pay scant attention to legal rights, although these determine enforceability and, therefore, economic value; and overestimate the power of unregulated private ordering, despite its inability to protect third parties. These three biases have been a misleading policy in many areas, including land titling and business firm formalization.

In this article, we explore different behavioural assumptions in the training of managers. We show that training emphasizing rationality and self-interest, the standard assumptions used in economics, benefits those working in technical posts but may lead future managers to rely excessively on rational and explicit safeguarding, crowding out instinctive relational heuristics and signalling a deficient human type to potential partners. In contrast, the diverse, implicit, and even contradictory nature of behavioural assumptions in management theories avoids conflict with innate cooperative tools and may provide a good training ground for using such tools. Tentative confirmatory evidence shows that the weight placed on behavioural assumptions in the core courses of the top 100 business schools influences the average salaries of their MBA graduates. Controlling for the self-selected average quality of students and some other school characteristics, average salaries are seen to be significantly greater for MBA programs that include a larger proportion of management courses in their core curriculum.

Simplifying business formalisation and eliminating outdated formalities is often a good way of improving the institutional environment for firms. Unfortunately, the World Bank's Doing Business project is harming such policies by promoting a reform agenda that gives them priority even in countries lacking functional business registers, so that the reformed registers keep producing valueless information, but faster. Its methodology also promotes biased measurements that impede proper consideration of the essential tradeoffs in the design of formalisation institutions. If Doing Business is to stop jeopardising its true objectives and contribute positively to scientific progress, institutional reform and economic development, then its aims, governance and methodology need to change.

Recent decisions by the Spanish national competition authority (TDC) mandate payment systems to include only two costs when setting their domestic multilateral interchange fees (MIFs): a fixed processing cost and a variable cost for the risk of fraud. This artificial lowering of MIFs will not lower consumer prices, because of uncompetitive retailing, but it will however lead to higher cardholders’ fees and, most likely, new prices for point of sale terminals, delaying the development of the immature Spanish card market. Also, to the extent that increased cardholders’ fees do not offset the fall in MIFs revenue, the task of issuing new cards will be underpaid relatively to the task of acquiring new merchants, causing an imbalance between the two sides of the payment networks. Moreover, the pricing scheme arising from the decisions will lead to the unbundling and underprovision of those services whose costs are excluded. Indeed, the payment guarantee and the free funding period will tend to be removed from the package of services currently provided, to be provided either by third parties, by issuers for a separate fee, or not at all, especially to smaller and medium-sized merchants. Transaction services will also suffer the consequences of the fact that the TDC precludes pricing them in variable terms.