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Populism is a political strategy that relies on the use of a personalistic political organization and mass communication to mobilize support in the quest for power; it will be most successful when it is more cost-effective than the alternatives of programmatic political party building or the distribution of patronage. The costs involved in this trade-off come in two forms: direct costs and indirect (or transaction) costs. In politics, very often transaction costs – search, bargaining, and enforcement costs – are the higher ones. Populists lower the costs of mobilizing support by communicating directly with voters instead of working through intermediaries such as party professionals or political brokers. The populist strategy will be most effective when two conditions are met. First, potential voters or supporters must be available for direct mobilization. This means that they must be relatively free of existing party attachments. Second, the opposition should be divided. Most populists win with the backing of a mere plurality rather than a majority. The more the opposition is split between multiple contenders, the more economically viable is the populist strategy.
The social foundations of the environmental strategy framework lie in Coaisan exchanges between companies and their stakeholders to reduce companies’ environmental impacts. A company’s environmental impacts are negative externalities in that they have consequences borne by those who did not choose to incur them. A Coasian exchange occurs when stakeholders compensate companies to reduce their production of negative externalities, resulting in outcomes that benefits the company and its stakeholders. The obstacles to Coasian exchanges are (1) search and screening costs to identify environmental improvements and stakeholders; (2) bargaining and transfer costs to negotiate terms and exchange resources; and (3) monitoring and enforcement costs to ensure both sides of the exchange uphold their obligations in the exchange. The goal of environmental strategy is to identify and mitigate these obstacles so that companies can implement environmental improvements that create value across the triple bottom line.
We discuss vertical mergers, which occur when two firms at different levels of the supply chain consolidate to become one firm. Vertical mergers can provide procompetitive benefits when they decrease transaction costs, such as those incurred in market exchange, and eliminate double marginalization. These mergers, however, may increase a firm’s market power, which could lead to raising rivals’ costs or market foreclosure. In this chapter, we provide a comprehensive theory of vertical integration. We also discuss mergers that involve suppliers of complementary goods.
The book opens with a discussion of the theoretical importance of the rise of social media, focusing on the way that decreases in transaction costs of communication change the potential for populations to solve their collective action problem. In addition, it highlights the historical importance of social media as a data source, with scholars having access to the communications of the public en masse for the first time. The cheapness and accessibility of this data democratizes data collection efforts, which changes the nature of research questions that can be asked by scholars.
This chapter reviews the evidence from the Greek world for tribute and taxation. It begins with some comparative considerations about tributary regimes and the impact of Achaemenid imperialism on the fiscal development of the Greek city-states, including the Delian League and the Hellenistic kingdoms. The transition from tribute to taxation is cast as a significant indicator of state formation. A fundamental theme in ancient Greek taxation is the relationship between coercion and consent, especially how political institutions facilitate the sharing of communal burdens by the rich. Extraordinary levies on property and persons were a common feature of city-states, which Macedon and the Hellenistic kingdoms also adopted. Finally, the chapter treats indirect taxes, which are thought to provide a much larger and more regular portion of state revenue in the Greek world.
Over the last twenty years, New Institutional Economics (NIE) has been a highly influential model in the study of the Greek and Roman economy. Although both its assumptions and methods are controversial, NIE approaches have changed the agenda of ancient economic history. The overall goal of neo-institutional economic history is to explain economic development, and notably growth, in line with a much-quoted phrase by the Nobel-prize winning economist Douglass North, that it is the task of economic history to explain the structure and performance of economies through time. NIE approaches and methods have therefore stimulated quite specific research directions in ancient economic history. This chapter suggests that NIE offers a fruitful conceptual matrix for asking new questions – with or without the answers necessarily staying within the NIE model. By contrast, the aim of the NIE method to predict and quantify outcomes, and the broader implications of the approach, are far more difficult to accept and defend. Particularly problematic is its commitment to certain kinds of growth as the desirable outcome of economic development, together with the assumption of the universal benefits of that growth, with its end point and golden standard explicitly or implicitly based on successful economies of the modern West.
The market in ancient Greece should be understood as a specific institutional construct, that of the city-state, which allowed its citizens to exercise private property rights guaranteed by law. By extension, free foreigners were also acknowledged these rights, which however extended to the private ownership of human beings (slavery). The city-state also created the conditions for an unusually high division of labour. Each city was a market space of its own, with its own rules and logic, which could include the control over sales margins and even sometimes the establishment of maximum prices for some perishable fresh goods. The network of hundreds of Greek city-states also created the conditions for the development of an original form of international market.
Although significant progress has been made in dealing with ancient economies through the establishing of new methodological approaches (like the New Institutional Economics), old-school Political Economy still plays an important role. It endeavours among other things to describe and evaluate the causes which lead to economic growth, thereby including factors which cannot be subsumed under the category of ‘institutions’ (exclusively focused on by the NIE) like demography or climate. Recently, this traditional approach has been intensively adopted to explain and measure the growth of ancient Greek economies between the ninth and fourth centuries, today viewed as an established fact in contrast to the older consensus, which was characterised by scepticism regarding the capability of ancient societies to generate sustainable growth. This chapter presents the most important factors that were (supposedly) conducive to growth and describes and their mutual interplay and interferences. In a further section, some methodological and empirical problems of the way 'ancient growth' is quantified in contemporary research are discussed. In a final section, some thoughts are offered on geo-economic factors, assumed by the author to have had a decisive impact in bringing about 'growth' or concentrations of wealth in some areas and milieus.
This chapter introduces a new framework that analyzes the role of timing and temporality in international institutions and world politics. It describes the temporal coordination dilemmas facing international actors. The chapter details the challenges posed by gradually accumulating incentives to alter international institutions and by the large number of actors that must be brought into the picture if institutional change efforts are to succeed. In realizing major change, a large array of moving pieces must be synchronized at one point in time, entailing considerable complexity and transaction costs. Indeed, the political and analytical investments – both international and domestic in nature – involved in recasting institutions are very substantial. Actors’ willingness to incur a sharp increase in transaction costs depends on their expectations that others will engage in a parallel effort. Thus, even as incentives to alter institutions mount, the inertial drift of institutional life persists until actors are able to reach a temporal convergence of expectations. At that time, actors make substantial investments in change processes and alter fundamentally their bargaining behavior.
This paper investigates the impact of the introduction of inflation-linked bonds, which incur transaction costs when traded, on the monetary economy with sunspots. This paper shows that there always exists a certain range of positive transaction costs, where both monetary and bond markets are active. This implies that on top of governments, profit-seeking financial entrepreneurs also have the incentive to issue these bonds. This paper also displays how financial innovation on the indexed bond can be Kaldor improving, even if not necessarily Pareto improving. This finding indicates that together with lump-sum tax policies, the government can attain consensus among consumers on bond issuance.
This chapter first explains how the Chinese Communist Party is organized and controls the political system. Unlike the political parties in mature democracies, the Chinese Communist Party is a Leninist party that resembles a secret society, characterized by monopolistic communist ideology, strict hierarchy, exclusive membership, and two unique party organs: the Propaganda Department, and the United Front Work Department. In such a political system, the party eclipses the entire society, including the government, creating a unique party-state that imposes absolute rule over China. The chapter further shows that, leveraging its total control, the party-state creates a low human rights environment in China that enables the party-state to achieve its objectives with few costs and little resistance. In the past four decades, China’s economy grew rapidly, creating a large middle class. However, due to its total dependence on the party, the newly emerged middle class is in no position to push for democracy and the rule of law.
Institutions produce social effects, and one vocabulary for thinking about these effects derives from economics and focuses on efficiency and inefficiency. Neoclassical economics held little space for institutions, beyond the sparest notion of uncoerced market exchange. Over the course of the twentieth century, problems associates with transaction costs, bounded rationality, strategic interaction, and puzzles of macroeconomic growth called forth welfare-impacting institutions. Beyond merely impacting incentives (e.g., by economizing on transaction costs), institutions came to play a central role in explaining thorny problems such as collective action and credible commitment. We survey a range of applications in economics or working broadly within its rational choice framework which speak to the increasing centrality of theories of institutions in explaining central social outcomes such as development. Efficiency approaches to institutional origins are superficially attractive, modeling them as choice outcomes, but can slip easily into problematic post hoc ergo propter hoc functionalism. By contrast, they show real comparative strength in accounting for institutional stability and change.
This topic relates to capital budgeting. The starting point is an explanation of why investment analysis is important in managerial economics, and the different types of investment and investment decision. Cash flow analysis and the principles involved in identifying and measuring relevant cash flows is discussed. The concept of risk and types of risk, stand-alone risk, within-firm risk and market risk, are discussed. The security market line (SML), beta coefficients and the capital asset pricing model (CAPM) are explained. The cost of capital is examined, explaining the calculation of the cost of debt, the cost of equity and the weighted average cost of capital (WACC). Methods of evaluation of individual projects are discussed, with a focus on net present value (NPV) and internal rate of return (IRR). There is a discussion of the determination of the optimal capital budget for a firm, in terms of the investment opportunity schedule (IOS) and the marginal cost of capital (MCC), with the distinction between mutually exclusive projects and independent projects. Case studies include two resource-heavy situations: the HS2 rail link and 5G telecommunications.
This topic examines government policy and regulation. The starting point is the objectives of government regulation and market failure. The implications for managerial decision making are outlined. The nature of market failure and its different aspects are discussed. Externalities are discussed, and the policy implications. Public goods, and their nature and policy implications, are examined. Imperfect information and the policy implications are discussed. Transaction costs are discussed. Monopoly and the nature of market power and its consequences are examined. Strategic behaviour, such as collusion, predatory pricing and exclusive dealing, is discussed. The distinction between structural and strategic barriers to entry and their different policy implications is explained. Aspects of new technology are discussed, such as network effects and the ‘winner-takes-most’ phenomenon. Various policy approaches and their costs and benefits are examined. Case studies involve two situations in the UK where governments may have made errors of policy. A final case study relates to the global phenomenon of increasing concentration and its consequences.
The collaboration principle in multimedia learning states that collaborative learning is most effective when the distribution advantage learners experience during collaborative learning (i.e., the cognitive benefit learners experience from being able to share the burden of information processing with team members) is larger than the transaction costs learners also experience (i.e., the cognitive demands placed on individual learners due to the need to communicate, coordinate, and regulate their actions). The design of multimedia environments may affect the outcomes of collaborative learning in a positive way, for example, by increasing the distribution advantage of learners by offering tools that facilitate sharing of information, or by lowering the transaction costs of collaboration by offering tools for effective communication.
Oliver E. Williamson, who died on May 21, 2020 at the age of 87, was one of the most influential social scientists of modern times. In 2009, he was co-recipient of the Nobel Prize in Economics. As of mid-October 2021, he had been cited an astonishing 317,838 times according to Google Scholar. His measured influence outdistances that of even his fellow Nobel Laureates Elinor Ostrom (230,667), Douglass C. North (187,577) and Ronald H. Coase (123,686). This special issue of the Journal of Institutional Economics brings together a distinguished roster of scholars to remember Williamson, to elucidate some of his key ideas and influences, and to extend the reach of his ideas to new arenas.
Cost structure is the engineering of economics. Rather than approach economics as a study of the motivation toward maximum utility or profit, we approach it as a structural design problem for which cost structure is the starting point. The main distinction is between fixed and variable costs, a distinction first devised by ceramicist Josiah Wedgwood after a financial crash in the 1770s. We consider Mine Kafon, the wind-powered landmine removal device designed by Massoud Hassani (collected by the Museum of Modern Art), the willfully inefficient production of Lenka Clayton, who makes drawings on a typewriter, the intentionally market-allergic manufacture of Charlotte Posenenske, the advances of technology that change cost structure and artistic production (tube paints and machine learning), and the costs of the Impressionist painters, especially Camille Pissarro. We use the breakeven calculation and the income statement to organize costs and to diagnose the sustainability of operations.
Oliver Williamson's contributions to the theory of the firm were of course seminal. Yet, they were not originally formulated to address the central question in strategic management: Why do some firms persistently outperform others in financial terms? We suggest that when Williamson did address this question, his efforts were not compelling. We also suggest, however, that with suitable adjustments, the key mechanisms in Williamson's theory can indeed usefully address this question.
More than 30 years ago, I engaged in a debate with Oliver Williamson over the theoretical structure of transaction cost economics (TCE). This debate had its origins in our conflicting views of the labor-managed firm (LMF). Williamson believed that such firms were rare due to their inefficiency while I believed they might be rare due to market failures. Here I clarify my criticisms of TCE and contrast Williamson's view of the LMF with my own approach. I discuss empirical evidence that can distinguish between these two approaches and take up Williamson's challenge to identify policy interventions that could yield net social gains.