Economists have traditionally treated preferences as exogenously given. Preferences are assumed to be influenced by neither beliefs nor the constraints people face. As a consequence, changes in behaviour are explained exclusively in terms of changes in the set of feasible alternatives. Here the...

This paper assesses the role of ideas in economic change, combining economic and historical analysis with insights from psychology, sociology and anthropology. Belief systems shape the system of categories ("pre-confirmatory bias") and perceptions (confirmatory bias), and are themselves...

An institution found in many traditional societies is the extended family system (kin system), an informal system of shared rights and obligations among extended family for the purpose of mutual assistance. In predominantly non-market economies, the kin system is a valuable institution providing...

How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? The authors investigate the demand for the rule of law in post-communist economies after privatization under the assumption that theft is possible, that those who have "stolen" assets...

If discrimination against an historically oppressed social group is dismantled, will the group forge ahead? The authors present experimental evidence that a history of social and legal disabilities may have persistent effects on a group's earnings through its impact on individuals' expectations....

The authors consider a multi-community city where community quality is linked to residents' civic efforts, such as being proactive in preventing crime and ensuring the quality of publicly provided goods. Homeownership increases incentives for such efforts, but credit market imperfections force...

In an earlier paper, the authors presented a mathematical exposition of a theory that demonstrated that mass privatization without institutions to limit asset-stripping may not lead to a demand for the rule of law ["After the Big Bang? Obstacles to the Emergence of the Rule of Law in...

Joseph E. Stiglitz, 2001 Nobel Laureate in Economics, helped create the theory of markets with asymmetric information and was one of the founders of modern development economics. He played a leading role in an intellectual revolution that changed the characterization of a market economy. In the...

An earlier paper showed that an economy could be trapped in an equilibrium state in which the absence of the rule of law led to asset-stripping, and the prevalence of asset-stripping led to the absence of a demand for the rule of law, highlighting a coordination failure. This paper looks more...

In a wide variety of settings, spiteful preferences would constitute an obstacle to cooperation, trade, and thus economic development. This paper shows that spiteful preferences - the desire to reduce another's material payoff for the mere purpose of increasing one's relative payoff - are...