The Theory of Institutions

ECS569 The Theory of Institutions

Autumn 2021

  • Topics

    From around 1870 to 1960, the social sciences fragmented, with sociology and political science building up disciplines that were separate from economics. With the advent of game theory, this process slowly reversed. Game theory generated new overlaps between economics, political science, and social psychology. More recently, there has been a strong movement to reintegrate economics with sociology. The course offers a glimpse of that progress.

    More specifically, the course sets forth a coherent conceptual framework for the analysis of societies in general and their culture and institutions in particular. We use this framework to discuss why societies differ so much in their degree and form of cooperation. The course ends by showcasing some recent work on the impact of culture on economic outcomes. Since the field is vast and rapidly evolving, the focus is more on understanding what kind of research can be done in this area than on grasping precisely what has already been done.

  • Learning outcome

    Knowledge

    At the end of the course, the students will have knowledge of:

    • central models of social preferences and social norms
    • evidence for and against these models
    • models of relational contracting, free-riding, and coercion
    • some empirical differences in cooperative behavior and their origins

    Skills

    At the end of the course, students will be able to use:

    • behavioral game theory to shed light on observed institutions
    • behavioral game theory to analyze prospects for institutional change

    General competence

    At the end of the course, students will be better prepared to think about:

    • the role of shared values in making individuals more sociable
    • the role of shared understandings in allowing (more or less sociable) people to cooperate
    • how perspectives from economics interact with perspectives from sociology

  • Teaching

    Standard lecture format, but with extensive interaction. The first part of the course is highly structured so as to establish a shared framework and language. The second part instead starts out from discussions of recent research papers and seeks to probe new directions. I will ask students to flag in advance themes that they are considering working on, so that these lectures can also adapt to student interests.

    The course requires physical attendance at NHH. However, if there is a lock down due to the pandemic the course will be offered digitally in real time (i.e. streamed during scheduled lecture hours.)

  • Credit reduction due to overlap

    ECS546 The Theory of Institutions 

  • Requirements for course approval

    Participation in lectures and approved topic for term paper.

  • Assessment

    Term paper, either individual author or pairs. Topic to be suggested by students and agreed with teacher at any time before June 15. Paper should be ready by August 15. 

  • Grading Scale

    Pass-Fail

  • Literature

    General readings:

    • Alesina, A. and Giuliano, P. (2015): Culture and Institutions, Journal of Economic Literature 53 (4), 898-944.
    • Ellingsen, T: Cooperation: A Very Short Introduction, book manuscript, 2020. (Will be made available by author.)
    • Mokyr, J.  (2013): Cultural Entrepreneurs and the Origins of Modern Economic Growth, Scandinavian Economic History Review 61 (1), 1-33.

     

    Lectures 1-2: The Nature of Preferences

    • Bisin, A.  and Verdier, T. (2001): The Economics of Cultural Transmission and the Dynamics of Preferences, Journal of Economic Theory 97, 298-319.
    • Ellingsen, T. and Mohlin, E. (2020). Dutiful Behavior: A Model of Moral Sentiments, Manuscript, Stockholm School of Economics.
    • Sobel, J. (2005):  Interdependent Preferences and Reciprocity, Journal of Economic Literature, 43(2), 392-436

     

    Lectures 3-4 Coordination, Change, and Partiality

    • Babcock, L. and Loewenstein, G. (1997): Explaining Bargaining Impasse: The Role of
    • Self--Serving Biases, Journal of Economic Perspectives 11 (1), 109-126.
    • Basu, S. et al (2009): Recordkeeping Alters Economic History by Promoting Reciprocity, PNAS106 (4), 1009-1014.
    • Chwe, M.S. (2001): Chapter 1 in Rational Ritual: Culture, Coordination and Common Knowledge, Princeton: Princeton University Press.

     

    Lectures 5-6 Relationships, Violence, and Need of Coercion

    • Acemoglu, D. and Wolitzky, A. (2019). Sustaining Cooperation: Community Enforcement versus Specialized Enforcement, Journal of the European Economic Association, 18(2), 1078-1122.
    • Dixit, A. (2003): On Modes of Economic Governance, Econometrica 71, 449-481.
    • Ellingsen, T, and Paltseva, E.  (2016): Confining the Coase Theorem: Contracting, Ownership, and Free-riding,  Review of Economic Studies 83, 547-586.
    • Greif, A. (2006): The Birth of Impersonal Exchange: The Community Responsibility System and Impartial Justice,  Journal of Economic Perspectives 20(2), 221-236.

     

    Lectures 7-8 Recent Research on Culture and State-Building

    • Bazzi, S., Fiszbein, M., and Gebresilasse, M., (2020) Frontier Culture: The Roots and Persistence of ``Rugged Individualism'' in the United States Econometrica, forthcoming.
    • Cagé, J., Dagorret, A., Grosjean, P., and Jha, S. (2020). Heroes and Villains: The Effects of Combat Heroism on Autocratic Values and Nazi Collaboration in France, manuscript.
    • Dell, Melissa, Nathan Lane, and Pablo Querubin (2018). The Historical State, Local Collective Action, and Economic Development in Vietnam. Econometrica 86(6), 2083-2121.
    • Dell, Melissa, and Pablo Querubin (2018). Nation Building Through Foreign Intervention: Evidence from Discontinuities in Military Strategies. Quarterly Journal of Economics 133(2), 701-764.
    • Enke, B. (2019). Kinship, Cooperation, and the Evolution of Moral Systems
    • Quarterly Journal of Economics, 2019, vol. 134(2), pp. 953-1019.
    • Enke, B. (2020). Moral Values and Voting Forthcoming, Journal of Political Economy
    • Enke, B.,Rodriguez-Padilla, R., and Zimmermann, F. (2020). Moral Universalism and the Structure of Ideology, manuscript.

Overview

ECTS Credits
7.5
Teaching language
English
Semester

Spring. Offered Spring 2021, 7-11 June.

Course responsible

Professor Tore Ellingsen, Stockholm School of Economics and NHH