Avner Greif

Stanford University | SU · Department of Economics

This paper highlights the importance of endogenous changes in the foundations of legitimacy for political regimes. It focuses on the central role of legitimacy changes in the rise of constitutional monarchy in England. It first defines legitimacy and briefly elaborates a theoretical framework enabling a historical study of this unobservable variabl...

This paper considers the possible contribution of spatial competition to the Industrial Revolution and the Great Divergence. Rather than exclusively focusing on the incentives of producers to adopt labor-saving technology, we also consider the incentives of factor suppliers’ organizations such as craft guilds to resist. Once we do so, industrializa...

Douglass North's writing on institutional change recognized from the very start that such change depends on cognition and beliefs. Yet, although he focused on individual beliefs, we argue in this paper that such beliefs are social constructs. We suggest that institutions – rules, expectations, and norms – are based on shared cognitive rules . Cogni...

Professor McCloskey makes many telling and insightful points in her survey and criticism of what she terms the new institutional economics; yet there are a number of shortcomings to her paper. One is that she has bundled together a variety of quite disparate approaches to the role institutions play, and refers to them as ‘neo-institutionalist’. We...

Over the last millennium, the clan and the corporation have been the loci of cooperation in China and Europe respectively. This paper examines – analytically and historically – the cultural and institutional co-evolution that led to this bifurcation. We highlight that groups with which individuals identify are basic units of cooperation. Such loyal...

Social institutions impact growth by redistributing resources to the young, the poor, the old, and the sick. This paper empirically substantiates that England's pre-modern social institutions–specifically, the Old Poor Law (1601-1834)–contributed to her transition to the modern economy. It reduced violent, innovation-inhibiting reactions from the e...

This paper examines the evolving effects of England's Old Poor Law (1601-1834). It establishes that poor relief reduced social unrest from around the late-17th century through the turn of the 19th century, at which point it began to spur population growth and its social stability effects dissipated. These conclusions are based on a new dataset enco...

Social institutions were often founded by the elite to avoid social upheavals. Institutions helped mitigate the threat of violent social responses to labor-saving innovations. But their organizational forms were influenced by preexisting cultural and social factors. The differences in Chinese and English social institutions explain why England beca...

Over the last millennium, the clan and the city have been the locus of cooperation in China and Europe respectively. This paper examines - analytically, historically,and empirically - the cultural, social, and institutional co-evolution that led to this bifurcation. We highlight that groups with which individuals identify are basic units of coopera...

Previous studies concluded that a private‐order institution based on a multilateral reputation mechanism was particularly important in governing agency relations among the Maghribi traders who operated in the Muslim Mediterranean. The legal system and a bilateral reputation mechanism were particularly important among the Genoese traders. Initial cu...

Economic, legal, and political institutions are important determinants of economic development (see, for example, North 1990). Economic institutions govern interactions among economic agents, legal institutions govern contractual relations and the private use of force, and political institutions govern the political decision-making process. Economi...

Recent scholarship has demonstrated the power of the rational choice framework for advancing our understanding of institutions and institutional change. Stimulated by these developments, the conceptual frameworks employed by scholars studying institutions have also been evolving, as old frameworks have been adapted and new frameworks have emerged t...

We analyze the role of risk-sharing institutions in transitions to modern economies. Transitions requires individual-level risk-taking in pursuing productivity-enhancing activities including using and developing new knowledge. Individual-level, idiosyncratic risk implies that distinct risk-sharing institutions - even those providing the same level...

Why, how, and under what conditions do moral beliefs persist despite institutional pressure for change? Why do the powerful often fail to promote the morality of their authority? This paper addresses these questions by presenting the role of crypto-morality in moral persistence. Crypto-morality is the secret adherence to one morality while practici...

We introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. We investigate the relative performance of VaR and ES models using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the 2008 fi...

Migration flows are shaped by a complex combination of self-selection and out-selection mechanisms. In this paper, the authors analyze how existing diasporas (the stock of people born in a country and living in another one) affect the size and human-capital structure of current migration flows. The analysis exploits a bilateral data set on internat...

Depuis sa these novatrice sur les Maghribis – ces commercants juifs de la Mediterranee musulmane du xie siecle –, les institutions ont toujours constitue le theme central des travaux d’Avner Greif, aujourd’hui professeur d’economie a l’universite de Stanford. En 2006, il publie un ouvrage resumant plus de quinze ans de recherches theoriques et empi...

What causes distinct trajectories of market development? Why did the modern market economy, characterized by impersonal exchange, first emerge in the West? This paper presents a theory of market development and evaluates it based on the histories of England, China, and Japan. The analysis focuses on how distinct coercion-constraining institutions t...

Current theories of the rule of law argue that public officials respect rights if the citizens are coordinated on an equilibrium in which they collectively resist abuse. Constitutional rules are means to coordinate on this equilibrium. In past and present states, however, constitutional rules often have no effect on the rule of law. This paper sugg...

Edwards and Ogilvie (2008) dispute the empirical basis for the view (Greif, e.g., 1989, 1994, 2006) that multilateral reputation mechanism mitigated agency problems among the eleventh-century Maghribi traders. They assert that the relations among merchants and agents were law-based. This paper refutes this assertion using quantitative and documenta...

A pioneer of the New Institutional Economics, Douglass North has built upon the property rights and transaction cost approaches of Coase and others to explain economic growth in terms not of changes in technology and productive factors but of institutional and organizational change. His most recent work stresses the need to integrate insights from...

Why did limited government and 'constitutionalism' (the rule of law, constitutional rules, and political representation) evolve in some societies but not others? Guided by history, this paper examines why this evolution reflects dependence on administrators to implement policy choices including those affecting them. Limited government and constitut...

It is widely believed that current disparities in economic, political, and social outcomes reflect distinct institutions. Institutions are invoked to explain why some countries are rich and others poor, some democratic and others dictatorial. But arguments of this sort gloss over the question of what institutions are, how they come about, and why t...

This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...

This paper describes the premodern European institution that supported impersonal exchange, in which a merchant's decision to exchange is independent either of expectations of future exchange with the same partner or of knowledge of that partner's past conduct or the ability to report misconduct to future trading partners. Economists know surprisin...

Markets rest upon institutions. The development of market-based exchange relies on the support of two institutional pillars that are, in turn, shaped by the development of markets. Research in the field of new institutional economics has largely focused upon one such institutional pillar—‘contract-enforcement institutions’—that determine the range...

This paper asks why and how institutions change. How does an institution persist in a changing environment and how do processes that it unleashes lead to its own demise? The paper shows that the game theoretic notion of self-enforcing equilibrium and the historical institutionalist focus on process are both inadequate to answer these questions. Bui...

This paper presents an institution - the Community Responsibility System (CRS) - which has been a missing link in our understanding of market development. The CRS fostered market expansion throughout pre-modern Europe by providing the contract enforcement required for impersonal exchange characterized by separation between the quid and the quo over...

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This paper surveys the small, yet growing, literature that uses game theory for economic history analysis. It elaborates on the promise and challenge of applying game theory to economic history and presents the approaches taken in conducting such an application. Most of the essay, however, is devoted to studies in economic history that use game the...

In stateless societies, coercion is privately provided; violence is employed to engage in, and to defend against, predation. At best, violence results in mere redistribution; being destructive, it more often results in a loss of social welfare. When organized, however, violence can be socially productive; it can be employed to defend property right...

This paper utilizes historical evidence and game theory to examine institutions that fostered intercommunity impersonal exchange during the late medieval period. It presents the community responsibility system that functioned throughout Europe and supported impersonal exchange despite the lack of impartial legal enforcement provided by a third part...

This book analyses the role of communities and markets in economic development. It is divided into three parts. Part I presents four chapters on historical and theoretical perspectives on the community and market. Part II contains four chapters focusing on the role of the community in the process of market development in contemporary developing and...

For individuals to enter mutually beneficial exchange relationships they have to recognise them as such and they have to be able to commit to fulfil their contractual obligations. The ways in which a society s institutions mitigate this fundamental problem of exchange determine its efficiency and distribution. This article calls attention to the ne...

We welcome the animated debate raised by Analytic Narratives concerning social scientific methods and the scope of rational choice. Advocates of mathematical and rational models have long claimed they have much to tell us about situations where behavior can be quantified or where the situation under study recurs many times. However, it was thought...

In Analytic Narratives, we attempt to address several issues. First, many of us are engaged in in-depth case studies, but we also seek to contribute to, and to make use of, theory. How might we best proceed? Second, the historian, the anthropologist, and the area specialist possess knowledge of a place and time. They have an understanding of the pa...

Les institutions interviennent sur l'efficacité d'une économie puisqu'elles modifient la répartition des ressources et les relations d'échange que les agents ont entre eux. De ce fait, pour examiner leur nature et leurs effets, il n'est pas de meilleur moyen que de tirer parti de la diversité des environnements apparus dans l'histoire. Une première...

This paper surveys the small, yet growing, literature that employs game theory for economic history analysis. It elaborates on the promise and challenge of integrating game theoretical and economic history analyses and presents the approaches taken in conducting such an integration. Most of the essay, however, is devoted to presenting studies in ec...

November 5, 1997 This paper presents a micro-level historical and theoretical analysis of Genoa's economic and political history during the twelfth and thirteenth century by examining the factors influencing the extent to which its political system was self-enforcing and their change over time. It combines narrative and theoretical analysis to res...

Transnational commons, cross-border areas without well-defined property rights, have long been ignored in ‘official’ development economics. This volume redresses the balance by adopting an environmental approach, which stresses the importance of shared natural resources and the links between acute poverty and environmental degradation. This book dr...

June 12, 1997 Existing works on the economic implications of social structures examined the effect of intra-community information and contract enforcement institutions on personal exchange among that community's members. In contrast, this paper examines the extent to which common knowledge regarding social structure impact the set of feasible inst...

First draft: July, 1995 This draft: March 4, 1996 Prepared for a symposia on Economic History in the Econometric Society, Seventh World Congress, Tokyo 1995. Forthcoming in Advances in Economic Theory. Edited by David M. Kreps and Kenneth F. Wallis. 1996. Cambridge University Press. This paper discusses the three approaches within economic histor...

interpretations, and conclusions expressed in this paper are entirely those of the author. They do not necessarily represent the views of the World Bank, its Executive Neoclassical economics maintains that a legal system is required to foster anonymous exchange and hence efficiency. In contrast, social scientists from other disciplines emphasize th...

Despite the diversity of economic environments and organizations utilized throughout history, historical studies of organizations and organizational innovations, by and large, have concentrated on the very recent past. Arguably, this reflects the perception that historical records are not rich enough, with respect to the more remote past, and organ...

July 11, 1995 In contrast to recent work in Regional Economics which emphasizes the role of an industry's scale in generating agglomeration economies, this paper emphasizes the importance of an industry's composition, that is, the number of firms generating agglomeration economies. As most recent work in this area, we assume that production is cha...

Although the late medieval Commercial Revolution is considered to be a watershed in the economic history of Europe, the analysis of the interrelationship between political and economic systems in bringing about this period of economic growth has been neglected. This article conducts such an analysis with respect to the city of Genoa during the twel...

The authors interpret historical evidence in light of a repeated-game model to conclude that merchant guilds emerged during the late medieval period to allow rulers of trade centers to commit to the security of alien merchants. The merchant guild developed the theoretically required attributes, secured merchants' property rights, and evolved in res...

This paper integrates game-theoretical and sociological concepts to conduct a comparative historical analysis of the relations between culture and institutions. It indicates the importance of culture, and in particular cultural beliefs, in determining institutions, in institutional path dependence, and in forestalling intersociety successful adopti...

This paper presents an economic institution which enabled eleventh-century traders to benefit from employing overseas agents despite the commitment problem inherent in these relations. Agency relations were governed by a coalition--an economic institution in which expectations, implicit contractual relations, and a specific information-transmission...

We identify incentives generated by the Bretton Woods II system that may have contributed to the sub-prime liquidity crisis now working its way through the international monetary system. We then evaluate the persistent conjecture that the liquidity crisis is or will become a balance of payments crisis for the United States. Given that it happens, t...

This paper asks why and how institutions change? How does an institution persist in a changing environment and how do processes that it unleashes lead to its own demise? The paper shows that the game theoretic notion of self-enforcing equilibrium and the historical institutionalist focus on process are both inadequate to answer these questions. Bui...

We model and experimentally examine the board structure-performance relationship. We examine single-tiered boards, two-tiered boards, insider-controlled boards, and outsider-controlled boards. We find that even insider-controlled boards frequently adopt institutionally preferred rather than self-interested policies. Two-tiered boards adopt institut...

This paper presents a framework for the integration of values (internalized norms) in a positive analysis of institutions and institutional change. Informal, norm-based institutions and formal - legal, economic, and political - institutions are co-determined as an equilibrium in the relations among economic and political actors. The paper discusses...

This paper analyzes the role of equilibrium, risk-sharing insti- tutions in leading to the structural transformation in the produc- tion technology that brought about the industrial revolution. Guided by history, the model considers two risk-sharing institutions each of complements an existing social structure. The …rst is a 'Chinese' style, lineag...

Abstract What causes distinct trajectories of market development? Why did the modern,market economy, characterized by impersonal exchange supported by formal institutions, first emerge in the West? This paper presents a theory of market development,and evaluates it based on the histories of England, China, and Japan. The analysis focuses on how dis...

Prepared for a 2008 AEA Annual Meeting Session on: Design and Reform of Institutions in LDCs and Transition Economies Considerable evidence indicates that prosperity increases with the rule of law. Less is known, however, about how to foster the rule of law in developing countries. Current constitutional theory conjectures that the rule of law prev...

The analytic narratives project represents an effort to clarify and make ex-plicit the approach adopted by numerous scholars trying to combine histori-cal and comparative research with rational choice models. In order to under-stand instances of institutional origin and change, analytic narrativists insist on the combination of deep knowledge of th...

El estudio de la evolución histórica de la organización empresarial ha estado durante mucho tiempo dominado por el concepto de organización como solución a los problemas de coordinación. La teoría de juegos ha permitido extender el análisis para considerar las organizaciones como respuestas a los problemas de cumplimiento de los contratos. Esta per...