3rd Econ Gov Workshop (2015)

Our keynote speakers and eight contributed papers, which originated from a call for papers attracting 85 submissions, complemented by a poster session, kept the audience busy during September 3rd and 4th . The event took place in a mansion in Tilburg’s city center, which facilitated academic interactions in a both secluded and distinguished atmosphere and allowed the workshop participants to reach all locations of social events by foot. With a maximum capacity of 50 participants, on Friday at 6 pm, the end of the event, still 40 participants were present, thereby voting with their feet.

Avner Greif (Stanford) had started the workshop with a talk about about social organizations on Thursday morning, and Simon Gächter (Nottingham) concluded on the same topic on Friday afternoon. Yet, their research methodologies - combining historical data with game theory, and using insights from a cross-cultural lab experiment conducted in 45 countries – were highly complementary. Mark Ramseyer (Harvard) explained by means of three examples from his experience studying Japanese institutions the dismal consequences that can occur if researchers do not know the origins of the data they work with. And Roland Bénabou (Princeton) presented an intuitive model studying the behavior of investment managers that showed how bonus payments can be excessive at equilibrium. He also derived an optimal interior level of competition – which implies that too much competition can distort investment managers’ incentives so much that total welfare declines. Many other interesting papers, studying the functions and interactions of social preferences and man-made rules that aim at fostering cooperation by means of theory, lab and field experiments, and extensive data work, ensured a constantly high level of discussions both during and between the academic sessions.

Keynote Speakers

Scientific Background

Research into social dilemmas is a cornerstone in the social sciences. The defining characteristic of such dilemmas is that mutual cooperation among the actors involved is efficient but that, unless adequate institutions are in place or actors have social preferences, deviating from cooperation is rational from the individual viewpoint. As a consequence of this incentive to free ride, transactions are not undertaken and economies grow by less than their full potential.

The field of economic governance studies how institutions can help to overcome the free-rider problem. In particular, it regards “the structure and functioning of the legal and social institutions that support economic activity and economic transactions by protecting property rights, enforcing contracts, and taking collective action to provide physical and organizational infrastructure” (Dixit, 2009). By its nature, economic governance necessitates the application of a broad set of methodologies, including game-theoretic modeling, empirical investigations, and case studies, connecting the disciplines of economics, law, management, sociology, history, political science, and potentially others.

Ultimately, the functioning and efficacy of diverse institutions crucially depends on how the institutions affect actors’ behavior. Therefore, when studying institutions, it is important to be aware of the preferences of the actors. By now, it is well accepted and convincingly shown in numerous laboratory experiments and empirical studies that at least some individuals are to at least some extent concerned about fairness, and that intrinsic motivation, empathy, but also spite are important drivers of human behavior.

After two economic governance workshops that focused on the role of competition (in 2010) and organizations (in 2013), respectively, we now strive to stimulate the debate about the role of (pro- and anti-)social preferences for the design of optimal institutions, both formal and informal, as solution mechanisms for economic governance problems. We aim to assemble scholars from several disciplines studying economic governance institutions with particular regard to the impact of the type of preferences held by the involved parties: standard vs. social; reciprocal vs. independent; heterogeneous vs. homogenous; to name just a few dimensions of distinction. Ideally, discussions at this gathering do not only evolve around positive questions but also touch on the normative implications of the results presented: what lessons can policy makers, regulators, organizers of private ordering institutions, and other market designers learn for optimal institutional design under specific economic, social, and political circumstances?

Specific Topics (non-exclusive)

• Under which conditions are prosocial preferences necessary to produce cooperation in social dilemmas? Can prosocial preferences serve as an equilibrium selection device in a game-theoretic model that has multiple equilibria?
• What are historical or current examples of economic governance institutions that rely on social preferences? Could these examples have existed with standard preferences?
• Are social preferences only important (or necessary?) in small groups, or are democratic political institutions that are designed to allow millions of citizens to influence political decisions also dependent on a certain degree of altruism? What does this tell us about institutional transplants from one cultural context onto another in general (for instance, as conditions of the Worldbank’s or the IMF’s requirements for support in crises)?
• Through which institutions can preferences be actively shaped by policy makers? For instance, (how) can education policy be used to make the young generation more social, thereby relaxing the need for other economic governance institutions (as in Tabellini, 2008)?
• What type of preferences constitutes reasonable assumptions when studying market interactions involving large, publicly traded corporations? (Under which conditions) can institutions that are designed to solve governance problems at the industry level work with standard preferences?
• Under which preferences can cooperation in social networks, online or offline, be expected? What implications does this have for policy makers and designers of networks (which could both be firms operating a network, e.g. Facebook, or nonprofit groups promoting a certain cause)?
• Where to fit prosocial preferences in existing taxonomies of economic governance institutions (e.g. Dixit, 2009, Masten and Prüfer, 2014)? Or are preferences orthogonal to institutions?
• Is there a need to foster new organizational forms, such as “societal enterprises” next to traditional firms and not-for-profit organizations? If so, in which sectors, and what forms? Do these enterprises depend on prosocial preferences of their workers and donors?
• Is the decline of formal private organizations providing social capital, such as clubs or many other nonprofits, an inevitable consequence of technological advancements that enable individuals to perform many operations on their own today? If so, is this a problem?

Program Committee

Program

Poster presentations

This workshop is financially supported by KNAW.