Conventions and Structures in Economic Organization

Conventions and Structures in Economic Organization

Markets, Networks and Hierarchies

New Horizons in Institutional and Evolutionary Economics series

Edited by Olivier Favereau and Emmanuel Lazega

This book contributes to the current rapprochement between economics and sociology. It examines the fact that individuals use rules and interdependencies to forward their own interests, while living in social environments where everyone does the same. The authors argue that to construct durable organizations and viable markets, they need to be able to handle both. However, thus far, economists and sociologists have not been able to reconcile the relationship between these two types of constraints on economic activity.

Chapter 3: Institutional embeddedness of economic exchange: convergence between new institutional economics and the economics of conventions

Christian Bessy

Subjects: economics and finance, economic psychology, history of economic thought, institutional economics, methodology of economics


Christian Bessy Certain developments in new institutional economics (NIE) over the past few years have created areas of overlap with the French school of thinking called ‘Economie des Conventions’ (economics of conventions, EC) on the question of the institutional embeddedness of economic exchange and its type of organization. Since the work of Williamson (if not of Coase), the comparison between different coordination mechanisms or organizational forms, depending on the characteristics of the institutional environment and, more analytically, the hypothesis of ‘bounded’ rationality, have constituted research perspectives common to both approaches. In his work on institutional change, North’s interest in the part played by ‘informal’ institutions (conventions, behavioural norms and so on) caused him to move further away from neoclassical economics (North, 1990). More recently, the emphasis on the articulation between cognitive processes and institutions (Knight and North, 1997) has brought him even closer to the research programme of the economics of conventions. These new perspectives initiated by NIE can be considered as slight divergences which are unlikely to fundamentally undermine the initial embeddedness of the neoclassical tradition, other than as ‘ad hoc’ additions (Guerrien, 1990), so that many divergences remain with the economics of conventions. The aim of this chapter is not, however, to list the similarities and divergences of the two approaches – which both show a degree of heterogeneity when we move away from the broad lines of the founders1 – but to identify the main similarities, taken from the most recent work of North, for NIE, and certain representatives...

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