Advertisement

Constitutional Political Economy

, Volume 1, Issue 3, pp 83–107 | Cite as

Conventions: An evolutionary approach

  • Karl Wärneryd
Article

Abstract

Conventions are social institutions that solve recurrent coordination problems. In normative game theory, coordination games are considered problematic because of the multiplicity of equilibria. From a neoinstitutionalist perspective, however, this multiplicity should be an important part of the explanation of real-world institutions. The paper discusses the evolutionary (or “positive”) game-theoretical approach to the emergence of conventions. I note a precise sense in which conventions may be said to minimize transaction costs, but that they need not be efficient. Example applications to language, money, and the theory of the firm are discussed.

Keywords

Economic Theory Game Theory Transaction Cost Social Institution Evolutionary Approach 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Alchian, A.A. (1950) “Uncertainty, evolution and economic theory.”Journal of Political Economy 58:211–221.CrossRefGoogle Scholar
  2. Barry, N. (1982) “The tradition of spontaneous order.”Literature of Liberty V:7–58.Google Scholar
  3. Brennan, G. and Buchanan, J.M. (1985)The Reason of Rules. New York: Cambridge University Press.Google Scholar
  4. Cavalli-Sforza, L.L. and Feldman, M.W. (1981)Cultural Transmission and Evolution: A Quantitative Approach. Princeton: Princeton University Press.Google Scholar
  5. Coase, R.H. (1937) “The nature of the firm.”Economica 4:386–405.Google Scholar
  6. Dahlman, C.J. (1979) “The problem of externality.”Journal of Law and Economics 22:141–162.CrossRefGoogle Scholar
  7. Dasgupta, P. (1989) “Applying game theory. Some theoretical considerations.”European Economic Review 33:619–624.CrossRefGoogle Scholar
  8. Dawkins, R. (1976)The Selfish Gene. Oxford: Oxford University Press.Google Scholar
  9. Elster, J. (1979)Ulysses and the Sirens: Studies in Rationality and Irrationality. Cambridge: Cambridge University Press.Google Scholar
  10. Elster, J. (1983)Explaining Technical Change: A Case Study in the Philosophy of Science. Cambridge: Cambridge University Press.Google Scholar
  11. Farrell, J. and Saloner, G. (1985) “Standardization, compatibility, and innovation.”Rand Journal of Economics 16:70–83.CrossRefGoogle Scholar
  12. Farrell, J. and Saloner, G. (1986) “Installed base and compatibility: innovation, product preannouncements, and predation.”American Economic Review 76:940–955.Google Scholar
  13. Friedman, M. (1953) “The methodology of positive economics.” In:Essays in Positive Economics. Chicago: University of Chicago Press.Google Scholar
  14. Granovetter, M. and Soong, R. (1986) “Threshold models of interpersonal effects in consumer demand.”Journal of Economic Behavior and Organization 7:83–99.CrossRefGoogle Scholar
  15. Harsanyi, J.C. (1977)Rational Behavior and Bargaining Equilibrium in Games and Social Situations. Cambridge: Cambridge University Press.Google Scholar
  16. Harsanyi, J.C. and Selten, R. (1988)A General Theory of Equilibrium Selection in Games. Cambridge: The MIT Press.Google Scholar
  17. Hayek, F.A. (1960)The Constitution of Liberty. Chicago: The University of Chicago Press.Google Scholar
  18. Hayek, F.A. (1973–1979)Law, Legislation and Liberty. (3 vols) Chicago: The University of Chicago Press.Google Scholar
  19. Hayek, F.A. (1979)The Counterrevolution of Science. Indianapolis: Liberty Press.Google Scholar
  20. Hayek, F.A. (1988)The Fatal Conceit. The Errors of Socialism. London: Routledge.Google Scholar
  21. Heiner, R.A. (1983) “The origin of predictable behavior.”American Economic Review 73:560–595.Google Scholar
  22. Katz, M.L., and Shapiro, C. (1986) “Technology adoption in the presence of network externalities.”Journal of Political Economy. 94:822–841.CrossRefGoogle Scholar
  23. Langlois, R.N. (1986a) “Coherence and Flexibility: social institutions in a world of radical uncertainty.” In: I.M. Kirzner (ed)Subjectivism, Intelligibility and Economic Understanding. New York University Press.Google Scholar
  24. Langlois, R.N. (1986b) “Rationality, institutions, and explanation.” In: R.N. Langlois (ed)Economics as a Process: Essays in the New Institutional Economics. Cambridge: Cambridge University Press.Google Scholar
  25. Lewis, D.K. (1986)Convention, A Philosophical Study. Oxford: Basil Blackwell.Google Scholar
  26. Luce, R.D. and Raiffa, H. (1957)Games and Decisions. New York: John Wiley.Google Scholar
  27. Marshall, A. (1920)Principles of Economics. (Eighth edition.) London: Macmillan.Google Scholar
  28. Maynard Smith, J. (1982)Evolution and the Theory of Games. Cambridge: Cambridge University Press.Google Scholar
  29. Menger, C. (1985)Investigations into the Method of the Social Sciences with Special Reference to Economics. (Translated by F.J. Nock) New York: New York University Press.Google Scholar
  30. Nelson, R.R. and Winter, S.G. (1982)An Evolutionary Theory of Economic Change. Cambridge: Harvard University Press.Google Scholar
  31. Nozick, R. (1974)Anarchy, State and Utopia. New York: Basic Books.Google Scholar
  32. Polanyi, M. (1951)The Logic of Liberty. Reflections and Rejoinders. Chicago: The University of Chicago Press.Google Scholar
  33. Polanyi, M. (1958)Personal Knowledge. Towards a Post-Critical Philosophy. London: Routledge and Kegan Paul.Google Scholar
  34. Popper, K.R. (1965)Conjectures and Refutations: The Growth of Scientific Knowledge. New York: Harper Colophon.Google Scholar
  35. Schelling, T.C. (1978)Micromotives and Macrobehavior. New York: Norton.Google Scholar
  36. Scotter, A. (1981)The Economic Theory of Social Institutions. Cambridge: Cambridge University Press.Google Scholar
  37. Schumpeter, J.A. (1934)The Theory of Economic Development. Cambridge: Harvard University Press.Google Scholar
  38. Selten, R. (1975) Re-examination of the perfectness concept for equilibrium points in extensive games.”International Journal of Game Theory 4:25–55.CrossRefGoogle Scholar
  39. Sugden, R. (1986)The Economics of Rights, Cooperation and Welfare. Oxford: Basil Blackwell.Google Scholar
  40. Taylor, P.D. and Jonker, L.B. (1978) “Evolutionarily stable strategies and game dynamics.”Mathematical Biosciences 40:145–156.CrossRefGoogle Scholar
  41. Ullmann-Margalit, E. (1977)The Emergence of Norms. Oxford: The Clarendon Press.Google Scholar
  42. Ullmann-Margalit, E. (1978) “Invisible hand explanations.”Synthese 39:263–291.CrossRefGoogle Scholar
  43. van Damme, E. (1987)Stability and Perfection of Nash Equilibria. Berlin: Springer-Verlag.Google Scholar
  44. Van Parijs, P. (1981)Evolutionary Explanation in the Social Sciences. An Emerging Paradigm. New York: Tavistock Publications.Google Scholar
  45. Vanberg, V. (1986) “Spontaneous market order and social rules: A critical examination of F.A. Hayek's theory of cultural evolution.”Economics and Philosophy 2:75–100.CrossRefGoogle Scholar
  46. Wallace, N. (1983) “A legal restrictions theory of the demand for ‘money’ and the role of monetary policy.”Federal Reserve Bank of Minneapolis Quarterly Review 7:1–7.Google Scholar
  47. Wärneryd, K. (1989a) “Legal restrictions and the evolution of media of exchange.”Journal of Institutional and Theoretical Economics 14:613–626.Google Scholar
  48. Wärneryd, K. (1989b) “Verbal signaling and Nash equilibrium.” Stockholm School of Economics.Google Scholar
  49. Wärneryd, K. (1990a) “A coordination theory of transaction costs and the firm.” Stockholm School of Economics.Google Scholar
  50. Wärneryd, K. (1990b) “Legal restrictions and monetary evolution.”Journal of Economic Behavior and Organization 13:117–124.CrossRefGoogle Scholar
  51. Witt, U. (1989) “The evolution of economic institutions as a propagation process.”Public Choice 62:155–172.CrossRefGoogle Scholar
  52. Zeeman, E.C. (1980) “Population dynamics from game theory.” In: Z. Nitecki and C. Robinson (eds)Global Theory of Dynamical Systems. Berlin: Springer-Verlag.Google Scholar

Copyright information

© George Mason University 1990

Authors and Affiliations

  • Karl Wärneryd
    • 1
  1. 1.Department of EconomicsStockholm School of EconomicsStockholmSweden

Personalised recommendations