Abstract
The groveling crisis that plagues Greece and that is deeply embedded in the European crisis, which is itself rooted in a more global setting of economic and political crises, reveals the complexity of the relationship between economy and democracy. It also shows how fragile both are and how deeply entrenched in politics are the questions raised and the solutions proposed.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
- 2.
See Hirschman (1970) for a great analysis of the role of ‘voice’ as opposed to ‘exit’ in making decisions acceptable and implementable.
- 3.
- 4.
Initially I used the concept of ‘micro-institutions’ (Menard 2008; De Mariz et al. 2013; Menard 2014) which was rightly pointed out by several discussants as a potential source of confusion with those organizations at the core of micro-economics (e.g., firms, networks). I consider these comments relevant: hence the change in wording.
- 5.
Some participants to the conference also pointed out, I think rightly so, that whether it is a bi-partisan system or a multi-parties system also makes a difference.
- 6.
However there is the risk of drawbacks, for example delegation may feed local corruption. This raises the issue of the desirable degree of delegation and the type of control mechanisms needed.
- 7.
According to these authors, external costs are nil under unanimity rule since each participant can block any unfavorable decision, positive under majority rules since minorities might end up with a worst situation than under status quo, and reach a maximum under “dictatorship or unique control.”
References
Acemoglu, D., & Robinson, J. A. (2012). Why nations fail. New York: Crown Business.
Arrow, K. (1974). The limits of organization. New York: Norton.
Benabou, R. (2015). The economics of motivated beliefs. Revue d’Economie Politique, 125, 665–686.
Benabou, R., & Tirole, J. (2003). Intrinsic and extrinsic motivation. Review of Economic Studies, 70, 489–520.
Benabou, R., & Tirole, J. (2006). Belief in a just world and redistributive politics. Quarterly Journal of Economics, 121, 699–746.
Buchanan, J., & Tullock, G. (1962). The calculus of consent. Ann Arbor: University of Michigan Press.
Coase, R. H. (1960). The problem of social cost. The Journal of Law and Economics, 3, 1–44.
De Mariz, C., Menard, C., & Abeille, B. (2013). Public procurement in Africa: Challenges in institutions and governance. Oxford: Oxford University Press.
De Vries, P., & Yehoue, E. B. (2013). The Routledge companion to Public-Private Partnerships. London: Routledge.
Eggestsson, T. (2015). El arte de la reforma institutcional y los problemas del trasplante institucional entre países. In F. Toboso & G. Caballero (Eds.), Democracia y políticas económico (pp. 409–424). Madrid: Editorial Sintesis.
Furubotn, E., & Richter, R. (2005). Institutions and economic theory. Ann Arbor: University of Michigan Press.
Greif, A. (2006). Institutions and the path to the modern economy: Lessons from medieval trade. Cambridge: Cambridge University Press.
Hirschman, A. O. (1970). Exit, voice, and loyalty. Cambridge: Harvard University Press.
Libecap, G. D. (2014). Addressing global externalities: Transaction costs considerations. Journal of Economic Literature, 52, 424–479.
Marshall, W., & Weingast, B. (1988). The industrial organization of congress. Journal of Political Economy, 96, 132–163.
Menard, C. (2008). Redesigning public utilities: The key role of micro-institutions. In J. Kornai, L. Mathyas, & G. Roland (Eds.), Corruption, development and institutional design (pp. 189–202). London: Palgrave-MacMillan.
Menard, C. (2013). Hybrid modes of organization. Alliances, joint ventures, networks, and other ‘strange’ animals. In R. Gibbons & J. Roberts (Eds.), The handbook of organizational economics (pp. 1066–1108). Princeton: Princeton University Press.
Menard, C. (2014). Embedding organizational arrangements: Towards a general model. Journal of Institutional Economics, 10, 567–589.
Niskanen, Q. W. A. (1968). Non-market decision making: The peculiar economics of bureaucracy. American Economic Review, 58, 293–305.
North, D. C. (1990). A transaction cost theory of politics. Journal of Theoretical Politics, 2, 355–367.
North, D. C. (2004). Understanding the process of economic change. Princeton: Princeton University Press.
North, D. C., Wallis, J., & Weingast, B. (2009). Violence and social orders. Cambridge: Cambridge University Press.
Ostrom, E. (2005). Understanding institutional diversity. Princeton: Princeton University Press.
Ostrom, E. (2014). Do Institutions for collective action evolve? Journal of Bioeconomics, 16, 3–30.
Qian, J. H., & Weingast, B. (2005). Regional decentralization and fiscal incentives: Federalism, chinese style. Journal of Public Economics, 89, 1719–1742.
Spiller, P., & Tommasi, M. (2007). The institutional foundations of public policy: The case of Argentina. Cambridge: Cambridge University Press.
Toboso, F., & Caballero, G. (2015). Democracia y políticas económias. Madrid: Editorial Sintesis.
Williamson, O. E. (1996). The mechanisms of governance. Oxford: Oxford University Press.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Additional information
Some arguments developed in this paper have been initially introduced in a prologue to Toboso and Caballero (2015). I am grateful to these editors and also to the organizers of the Pan-hellenic Conference on Economy and Democracy, held in Greece in November 2015, who gave me the opportunity to explore what is for me a new terrain. In doing so, I largely benefited from remarks and suggestions from participants to the conference, and more specifically Geoff Hodgson, Nikolaos Kyriazis, and Michael Zouboulakis. Of course, all opinions and interpretations submitted hereafter remain entirely under my responsibility.
Rights and permissions
Copyright information
© 2017 Springer International Publishing AG
About this chapter
Cite this chapter
Ménard, C. (2017). Facing Crises: Economy, Democracy, and Political Transaction Costs. In: Bitros, G., Kyriazis, N. (eds) Democracy and an Open-Economy World Order. Springer, Cham. https://doi.org/10.1007/978-3-319-52168-8_8
Download citation
DOI: https://doi.org/10.1007/978-3-319-52168-8_8
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-52167-1
Online ISBN: 978-3-319-52168-8
eBook Packages: Political Science and International StudiesPolitical Science and International Studies (R0)