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Institutions, Contracts and Organizations

Institutions, Contracts and Organizations

Perspectives from New Institutional Economics

Edited by Claude Ménard

This outstanding book presents new original contributions from some of the world’s leading economists including Ronald Coase, Douglass C. North, Masahiko Aoki, Oliver E. Williamson and Harold Demsetz. It demonstrates the extent and depth of the New Institutional Economics research programme which is having a worldwide impact on the economics profession.

Chapter 18: The lens through which we see: the impact of ideas on institutional enforcement

Jose Alberto Garibaldi-Fernández

Subjects: economics and finance, industrial organisation, institutional economics


Jose Alberto Garibaldi-Fernández INTRODUCTION Institutional enforcement has become central in the study of the success or failure of transactions. However, little has been done to compare the specific causes through which societies have failed or succeeded in trying to achieve this. There are crucial differences, both formal and informal, between enforcement procedures among countries. These differences are even more bizarre when countries with similar formal institutions are compared. The countries of Latin America are excellent examples. Although they imported most of their formal legal and political institutions from Western Europe and the USA, they operate in quite different ways there than in their place of origin. Recent reform attempts have had mixed results. This chapter seeks to analyse the role of informal, non-written, interpretative constraints, which might help explain these differences in performance, and provide paths to reform. Advances have already been made in the role of rent-seeking mechanisms and corruption (Moore and Garibaldi 1994) and institutional inertia (Buscaglia and Dakolias 1995) as explanations of the poor performance of Latin American enforcement institutions. This chapter explores a complementary line of research, in which there is a significant amount of research yet to be done. It argues that legal traditions, political institutions and administrative arrangements in enforcement institutions affect the intersubjective ‘models’ that people possess to organize and interpret the world of transactions around them. These models in turn are a key to individual choices that affect economic performance. If reform is sought, these models should also be...

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