The politics of financial governance under conditions of uncertainty has re-emerged as a significant issue for scholars of International Political Economy and related fields, not least because of the fallout from the 2007-2008 financial crisis. In this article I assess the legacy of Frank H. Knight's Risk, Uncertainty, and Profit for debates about reconceptualising financial governance and fostering financial stability. I argue Knight's book is productive in assisting understanding of the fallacies of the ‘risk-based’ economic theory tending to underpin financial governance, in particular drawing attention to the limitations of social scientific knowledge that reduce governance capacity and increase uncertainty in financial markets. I further argue, after Knight's deliberately paradoxical approach, that uncertainty in finance might be beyond regulation but at the same time there is still a societal need to attempt to achieve a politics of uncertainty that can cope with ignorance of the future through experimental governmental efforts.

Financial institutions in developing economies fail to provide entrepreneurs with access to finance to grow their businesses. This severely hampers economic development in these countries. We seek to explain why and develop an argument and model based on Knight's theory, which we augment in two ways. First, by describing problems embedded in financial institutions of developing economies, for which we use the Schumpeterian view that creative destruction requires new credit to fund entrepreneurial disruption and de Soto's finding that undocumented assets possessed by entrepreneurs in developing economies cannot be leveraged as collateral to access finance. Second, we use Williamson's hierarchical institutional model to distinguish vertical interactions. The model is illustrated using the case of Uganda, a developing country in Eastern Africa. Our analysis finds that Uganda suffers from intertwined and misaligned formal and informal institutions, limited extent of codified property, and sparse access to finance. The findings prompt policymakers in developing economies to consider problems with and within financial institutions.

In this study, we examine disparities in financial development at the regional level in India. The major research questions of the study are: how do we measure the level of financial development at the sub-national level? How unequal is financial development across the states? Does it vary by ownership of financial institutions? To explore these research questions, our study develops a composite banking development index at the sub-national level for three different bank groups – public, private and foreign for 25 Indian states covering 1996–2015. Our findings suggest that despite reforms, banking development is significantly higher in the leading high income and more developed regions compared to lagging ones. Furthermore, we find that all bank groups including public banks are concentrated more in the developed regions. Overall, over the years the position of top three and bottom three states in the aggregate banking index have remained unchanged reflecting lop-sidedness of regional development. We also note improvement in the ranking of some north-eastern states during the period 2009–15.

Silvestri interviews McCloskey about her forthcoming book, ‘Beyond Behaviorism, Positivism, and Neo-Institutionalism in Economics’, critical of recent economics, especially of neo-institutionalism. Neo-institutionalism uses the ugly character ‘Herr Max U’ as its central idea: the elevation of Prudence to the only virtue. Institutions are mainly intermediate, not ultimate, causes in society. Ethics, rhetoric, identity, ideology, and ideas matter. McCloskey's turn to defending liberalism is in the background of her critique of behaviorism, positivism, and neo-institutionalism as anti-liberal, reducing the analysis of people to a model of childish slaves. Liberalism is the theory of non-slave adults. Of the big ideas of the past few centuries, only liberalism treats people with suitable dignity, and permits them to have a go, and make others rich. Neo-institutionalism shares the two sins of modern Samuelsonian economics: a devotion of mere existence proofs; and a deviation to arbitrary tests of statistical ‘significance’. And in its tale of a rise of ‘capitalism’, it shares the errors of amateur economic history. The better word for the modern economic world of the Great Enrichment – fully 3,000% increases in real income per person – is ‘innovism’. Neo-institutionalism, as the method of historical economics, must be replaced by ‘Humanomics’.

This paper explores the interaction of informal constraints on human behaviour by examining the evolution of English football jerseys. The jersey provides an excellent setting to demonstrate how informal constraints emerge from formal rules and shape human behaviour. Customs, approved norms and habits are all observed in this setting. The commercialisation of football in recent decades has resulted in these informal constraints, in many cases dating back over a century, co-existing with branding, goodwill and identity effects. Combined, these motivate clubs to maintain the status quo. As a result, club colours have remained remarkably resilient within a frequently changing landscape.

This paper explains how informal institutions influence the reaction to the COVID-19 pandemic and the response to formal restrictions. I claim that it is not enough to introduce countermeasures, as individuals must follow them if they are to be effective. The acceptance of such measures is reflected in individuals' degrees of mobility decrease and contact reduction, the aims of governmental restrictions. I identify a group of attitudes connected with individuals' responses that differ across countries. They are associated with social relations and approaches to dealing with problems. The analysis confirms that formal restrictions can be seen as successful only if they are supported by strong informal institutions. In some cases, they even define individuals' reactions more than formal recommendations. The findings are useful not only for explaining the special case of reaction to pandemic restrictions but also for investigating what generally determines individuals' compliance with formal rules.

The last two chapters of Frank H. Knight's Risk, Uncertainty and Profit are seldom cited and frequently ignored. But in those chapters, Knight moves from entrepreneurial judgment and organizational strategies to meet the dilemmas uncertainty presents in a firm to the wider question of how uncertainty affects the social organization of economic activity. Ignoring the concluding chapters of Knight's book means we miss an important part of his early career thoughts on the tradeoffs between free enterprise and the social organization of economic activity. The purpose of the paper is to lay out the perspective on social economic organization that he took in the final two chapters of his first major work against the context of his other contemporary writings.

We owe Williamson for the formal introduction of hybrid organizations as essential building blocks in ‘the institutional structure of production’. The analysis of these institutional arrangements, which culminated in The Mechanisms of Governance, provided a unified approach to the variety of setting within which transactions are embedded, opening a new perspective on a cornerstone of modern economies. This essay explores the past, present, and future of this breakthrough. First, it reviews the progressive integration of hybrids as a category of their own in the classic ‘make-or-buy’ model, inserting hybrids as an ‘intermediate’ form different from markets in that adaptation cannot be done unilaterally and different from ‘unified organizations’ in that adaptation cannot be done by fiat. Second, it shows how this initial characterization of hybrids, besides providing a coherent approach to empirical research available at the time, gave a powerful impulse to new contributions, identifying more rigorously the fundamental features of hybrids, throwing light on why firms go hybrid, and explicating the governance structure chosen. Last, it offers insights on a research program that remains a work in progress, delineating new terrains to explore and new puzzles to solve.

Many years ago, Emmanuel Todd came up with a classification of family types and argued that the historically prevalent family types in a society have important consequences for its economic, political, and social development. Here, we evaluate Todd's most important predictions empirically. Relying on a parsimonious model with exogenous covariates, we find mixed results. On the one hand, authoritarian family types are, in stark contrast to Todd's predictions, associated with increased levels of the rule of law and innovation. On the other hand, and in line with Todd's expectations, communitarian family types are linked to racism, low levels of the rule of law, and late industrialization. Countries in which endogamy is frequently practiced also display an expectedly high level of state fragility and weak civil society organizations.

Much agreement exists among economic historians that an institutional structure which allows for broad participation in a country's economy is conducive to growth. With respect to England's institutional structure, changes that followed the Glorious Revolution of 1688 are given pride of place in recent literature. This article contributes to this literature by highlighting and explaining regulatory change that removed barriers to entry into the country's most vital industry, textiles, in the years between 1550 and 1640. However, although economic historians have tended to explain England's growth-facilitating institutions as arising abruptly through political revolution that placed constraints on the Crown, this article will elucidate change that was protracted, accretive, peaceful, and came through royal institutions. More specifically, this article argues that restrictive regulations, which were widely supported, were removed because Crown and Council, in consultation with local officials, recognized that enforcement would come at the cost of the greater priority of employment preservation.

We examine the cultural context for individual's trust in public institutions. To shed some light on possible cultural explanations from a more comparative perspective and cover a wider set of cultural aspects, we use indicators of cultural dimensions by Kaasa et al. (2014) based on Hofstede's (1980) approach. Multilevel regression analysis is conducted with individual-level data from two waves of the European Social Survey (2008, 2010) and regional-level data from multiple sources. Confirmatory factor analysis is used to construct the indicators of social and institutional trust and corruption. Our results suggest that individuals tend to trust institutions less in regions with large power distance. Hence, an important key for governments being more successful in achieving their aims seems to be related to improving the sense of participation and civic responsibility.

France relies on unionized judges to assess labor cases in court. The economic literature advocates that judges pertaining to the more belligerent unions alter judicial equilibrium, foster lower settlements, avoid trials, and intensify a professional judge's interventions. This paper intends to test whether such speculations are accurate. The empirical evidence provided here suggests that such fears are not grounded. Using a database on French employment courts, between 2012 and 2016, we show that judges from the most adversarial trade unions foster conciliation and reduce the number of dropped legal cases. The lack of statistically significant impact of unions on the judicial institution's dysfunctions is evident: the labor judiciary's alleged polarization does not drive the rate of appeals and the number of professional judges' intervention. Finally, the judicial malfunctions appear to be driven by institutional distortions and local socio-economic conditions.

This paper links banking system development to the colonial and legal history of African countries. Based on a sample of 40 African countries from 2000 to 2018, our empirical findings show a significant dependence of current financial institutions on the inherited legal origin and the colonization type. Findings also reveal that current financial legal institutions are not major determinants of banking system development, and that institutional development and governance quality are more important. A high share of government spending relative to GDP also positively affects banking system development in African countries.

All law is relatively coarse after its initial implementation as the legislature cannot foresee all contingencies that can arise in the actual application of the law. Therefore, decisions need to be made by street-level administrators as novel and particular circumstances arise. Economists have largely ignored the political science literature on street-level bureaucrats, such as policemen, welfare case managers, or regulatory agents. I present a case study in the context of market entry regulation in Germany. Qualitative and quantitative evidence suggests that bureaucratic discretion exists, that is, administrative actions can be found on different ends of a decision space, and that its effects are potentially large. Administrators do not apply legislation in a uniform manner and we observe a systematically different application of rules across subnational jurisdictions.

I analyze institutions of prison subculture that mitigate potential violent confrontations among inmates, in contrast to Hobbesian-Zimbardo default spontaneous violence. The games that are relatively rarely played in prison are Chicken and other violent confrontation games. Incoming rookie inmates are subject to initiation tests that allocate them into different subcultural groups, which signals their toughness and disincentivizes fighting. Most experienced inmates develop the eristic skills utilizing prison argot, use informal conflict adjudicators, and fake aggression toward rookies. All inmates form defensive coalitions. Finally, when inmates commit self-injuries, they follow well-rehearsed protocols to minimize the damage to their bodies and to maximize the impression made on the authorities. The secret knowledge of the associated rules, tricks, and cons is passed down over generations of prisoners through informal schooling. The material for this study comes from two Polish prisons, where the author spent 5 months as a political prisoner in 1985.

Several existing studies have documented a negative relationship between firm financial constraint and export activities but do not attempt to examine factors that could attenuate this relationship in Africa. In this paper, we examine the effect of financial constraint on exports in Africa and explore how the level of trust in countries where firms are located shapes this relationship. We combine the World Bank Enterprise Surveys with different measures of country-level personal and interpersonal trust computed from the Afrobarometer surveys of 19 African countries. Our results show that financial constraints negatively affect export activities. However, this negative effect is attenuated for firms that are located in trust-intensive societies. These findings are robust to different specifications. Interestingly, we find that small and medium-sized enterprises in Africa are more likely to be affected by financial constraints but also more likely to benefit from a higher level of both personal and interpersonal trust, while for larger firms only interpersonal trust matters.

In this study, we investigate the mediating effect of institutional networking on the relationship between perceived corruption and the growth of small and medium-sized enterprises (SMEs). We also examine the moderating impact of financial slack on the relationship between perceived corruption and institutional networking. We test our moderated mediation model using data from 212 SMEs operating in Ghana. The findings from the study show that perceived corruption is positively related to institutional networking and this relationship is amplified when levels of financial slack are greater. The findings also show that institutional networking positively mediates the relationship between perceived corruption and SME growth. Theoretical and practical implications are discussed.

We test the effect of institutional quality on capital structure in the microfinance setting. In doing this, we rely on data from 532 microfinance institutions (MFIs) located in 73 countries dotted across the six microfinance regions in the world. We observe that institutional quality exhibits a robust negative and statistically significant relationship with capital structure in both the short and long run, implying that MFIs in countries with a better institutional environment are less likely to utilize more debt. Our moderation analysis furnishes us with evidence that the presence of women on the board of an MFI significantly moderates the relationship between institutional quality and its capital structure. We show that in the presence of more female representation on the boards of MFIs, the tendency of MFIs using less debt is higher.

Individualistic values are often presented as promoting economic development; however, their links to relevant behaviour and preferences at the micro-level remain under-explored. Here we investigate the relationship between individualistic values and personal attitudes towards reporting corruption. Unlike much of the previous research which focuses on attitudes towards corruption, we analyse the micro-level mechanisms relating to one's willingness to escape the status quo and act against corruption. We also focus on a region associated with persistently high levels of perceived corruption. Our findings indicate that individualism is associated with a greater likelihood to act against corruption. The effect estimated is small but highly significant and robust to changes in estimators and specifications. We also find evidence that institutional trust and individualism strengthen each other to generate greater willingness to report corruption.