Papers by William Ferguson
Oxford University Press eBooks, May 19, 2022
The Political Economy of Collective Action, Inequality, and Development
This chapter develops a social conflict theory of institutions. The third hypothesis posits that ... more This chapter develops a social conflict theory of institutions. The third hypothesis posits that unequal distributions of power shape the creation, evolution, and demise of economic and political institutions. A background discussion defines power—a slightly slippery concept—and addresses key sources and manifestations of power. Unequal distributions of power then generate a series of CAPs associated with asymmetric influence on institutional construction and evolution. A flowchart model illustrates. To complicate matters, the fourth hypothesis posits that powerful parties cannot, left to themselves, credibly promise to refrain from using their power for their own future gain—often at the expense of others. Specifically, without institutional and motivational constraint, powerful parties may seize the gains from others’ investments in potentially fruitful economic and political activities. Functional development thus requires resolving multiple, largely second-order, CAPs related to...
Political Settlements and Development
This chapter provides an extended illustration of the authors’ new approach by applying it to Sou... more This chapter provides an extended illustration of the authors’ new approach by applying it to South Africa, a country that, since 1960, has experienced all four types of settlement. The emphasis is on showing how empirical developments in that country are reflected in the country codings, and also how the concepts provide a helpful language for explaining what is observed. On the one hand, there is a broad story of South Africa transitioning between settlement types, and on the other, by lifting the hood and examining the construction of these variables, a more precise and fine-grained analytical narrative than more conventional accounts provide is arrived at.
The Political Economy of Collective Action, Inequality, and Development, 2020
Political settlements underlie institutional construction and thus a society’s prospects for deve... more Political settlements underlie institutional construction and thus a society’s prospects for development. Without some mutually understood method for settling major disputes through politics rather than organized violence, institutions cannot resolve CAPs that impede development. This chapter develops my approach to categorizing political settlements. It offers a framework that permits systematic inquiry into relationships between distributions of power, institutional evolution, and prospects for resolving a series of context-specific CAPs of achieving economic and political development. Political settlements differ fundamentally according to their social foundations’which groups are party to the settlement’and their configuration of authority among insider elites. A four-quadrant typology distinguishes between broad and narrow social foundations and coherent (unipolar) versus disorganized (multipolar) configurations of authority. Additionally, the presence of resource constraints a...
Why do some societies achieve high standards of living, relatively broad access to education and ... more Why do some societies achieve high standards of living, relatively broad access to education and quality health care, serviceable infrastructure, predictable and largely impersonal legal procedures, and relatively accessible avenues to peaceful political expression, while others stagnate with guarded islands of extravagant wealth, surrounded by oceans of poverty, corrupt autocratic systems, and simmering conflicts—or even full-blown civil wars? Why, did South Korea, a dictatorship that faced devastating war from 1950-1954, and whose 1960 GDP per capita was half that of Mexico and twice that of India, have, by 2015, a per capita GDP that exceeded Mexico’s by a factor of three and India’s by a factor of 17—in addition to a largely peaceful transition to democracy? How might a society, trapped in stagnation, corruption, and repression, initiate and sustain processes of economic and political development?
SSRN Electronic Journal, 2019
This paper presents a theoretical argument focused on how social norms and formal institutions op... more This paper presents a theoretical argument focused on how social norms and formal institutions operate as cognitive coping mechanisms among groupings of boundedly rational actors who face fundamental uncertainty concerning their political and economic environments. Broadly speaking, informal and formal institutions facilitate strategic decision making by coordinating agents’ understandings of their social environments and their conceptions of how myriad actions of involved participants (including themselves) may affect such environments, along with their positions and wellbeing. Yet institutions and the associated cognitive processes, are subject to periods of rapid transformation that sometimes exhibit properties of cascading imitation across individuals and groups. <br><br>After addressing background concepts, this paper makes four related assertions. First, heuristics and, by extension, mental models respond to shared narratives in a fashion that often generates conformity of belief and action. Second, mental models follow the dynamics of punctuated equilibrium processes. Third, institutions are a type of shared mental model that convey basic understandings across uncertain environments. Fourth, by enabling boundedly rational actors to manage uncertainty, institutions effectively choreograph social activity. Discussion includes reference to classical, evolutionary and epistemic game-theoretic modeling. Social choreography thus follows punctuated equilibrium dynamics that offer relative predictability during stable phases and stark uncertainty during rapid phases of punctuation. The paper closes with a fewon implications on the political economy of institutional change.<br>
SSRN Electronic Journal, 2017
Radical reform displaces social equilibria. It reorients key institutions and underlying mechanis... more Radical reform displaces social equilibria. It reorients key institutions and underlying mechanisms of coordination and enforcement. This paper presents a broad framework for analyzing radical reform in terms of a large set of collective-action problems faced by potential reformers. It merges concepts that often appear separately in the literature, including social preferences, power relationships, policy subsystems, institutional stability, types of institutional change, and types of agents. Relatively simple game-theoretic models offer a platform for depicting key interactions. Over time, these interactions follow a punctuated-equilibrium dynamic, within which incremental reforms sometimes sow the seeds for punctuation via radical reform. Punctuation unfolds as an information cascade of rapidly shifting perceptions and activity within a social network. Ultimately, this paper offers conceptual foundations for examining how activists occasionally succeed in instigating or facilitating radical reform-and why they so often fail. This framework can then spawn a host of more targeted models and multiple empirical hypotheses. I thank Peter Hall, Robert Hancke, and Tim Werner for helpful comments on a previous draft of this paper. I thank the Department of Economics at the University College London for the use of an office and for technical support, and Frank Witte for arranging such support. I thank Grinnell College and especially the Dean's office for financial assistance with this project. Electronic copy available at: The Political Economy of Collective Action and Radical Reform Ferguson 1 1 Self-interest can reflect material preferences; it may also incorporate social preferences (e.g., status). 2 See Ostrom (1990) on institutional design as a second-order CAP. See Ferguson (2013) on first-and second-order CAPs as they relate to both the micro foundations of exchange and macro-level prospects for development. Electronic copy available at: The Political Economy of Collective Action and Radical Reform Ferguson 6 Institutional systems here are equivalent to institutions. My approach fits Greif's assertion that rules cannot alone generate social equilibria; complementary organizations are needed. But my approach maintains the distinction between rules and players. "We spent so much time distinguishing between institutions and organizations!" (Elinor Ostrom, conversation with the author, August 2011). 7 At a cognitive level, the mental models of boundedly rational individuals operate as punctuated equilibria.
This paper investigates bilateral market power in labor markets by merging an effort or labor dis... more This paper investigates bilateral market power in labor markets by merging an effort or labor discipline model with a turnover cost model. The effort model indicates unilateral employer power over workers; adding costly turnover allows for bilateral power in employment relationships. Systematic differences in exogenous determinates of the cost of job loss to workers and replacement costs to firms can help explain observed patterns of wage differentiation, including distinctions between segments of dual labor markets, interindustry wage differentials, the response of skill-based differentials to technological change and international competition, race- and gender-based differentials, and regional and national changes in unemployment.
The Journal of Economic Education, 2011
Review of Radical Political Economics, 1996
This paper investigates causes of the dramatic increase in the wage-productivity gap—the divergen... more This paper investigates causes of the dramatic increase in the wage-productivity gap—the divergence between the growth rates of aggregate productivity and real wages - in the post-1981 period. Using a two-step estimation procedure which incorporates three-digit industry wage regression coefficients into an aggregate wage growth identity equation, it finds that employment decline within unionized industries explains 18% of the post-1981 increase in the gap and that declining union ability to raise wages may explain as much as another 25%. Imports, on the other hand, do not appear to explain the gap independently of employment effects.
Review of Radical Political Economics, 1994
Review of Radical Political Economics, 1991
A simple two-sector effort-regulation model, which assumes that the cost of job loss responds to ... more A simple two-sector effort-regulation model, which assumes that the cost of job loss responds to labor&#39;s bargaining power and which acknowledges influences of institutional change, import penetration and shifting employment, can account for the declining real wages for non-supervisory workers in goods sector industries in the 1980s.
Journal of Institutional and Theoretical Economics, 2005
This paper addresses implicit bargaining power within employment relationships using a versatile ... more This paper addresses implicit bargaining power within employment relationships using a versatile model of labor market segmentation that combines labor discipline, performance pay, insider power, and fair wage principles. In the primary sector, fair wage comparisons, firm-specific human capital, and less perfect monitoring engender bilateral bargaining power, yielding high compensation, sometimes including a bonus. Secondary-sector employers exert unilateral bargaining power, via credible dismissal threats with no replacement costs, and offer no bonuses. Differential determinates of implicit bargaining power can potentially explain various phenomena, including nominal wage rigidity, union wage differentials, job-specific wage differentials, and gender or race-based wage differentials. (JEL: J 40, J 30, J 50) * In preparing this paper I benefited from research assistance from Wanlin Liu and Kate Anderson, comments from Paul McGrath, Raymond Robertson and Daniel Aaronson on early drafts, as well as more recent and very helpful comments from two anonymous referees.
SSRN Electronic Journal, 2008
ABSTRACT Undergraduate economics lags behind cutting-edge economic theory. This paper briefly rev... more ABSTRACT Undergraduate economics lags behind cutting-edge economic theory. This paper briefly reviews seven related advances: game theory modeling, information economics, social preference, conceptualizing rationality, contracting/enforcement, collective-action problems, and social mechanisms/institutions. These developments profoundly extend and deepen economic analysis. A game-theoretic political-economy perspective facilitates their integration into the undergraduate curriculum. This paper offers specific concepts for introductory economics including reciprocity as a fundamental element of utility and implications of non-rival knowledge on economic growth. If offers prisoners&#39; dilemma representations of collective-action problems as an analytical framework, on par with supply/demand, for analyzing market failures, enforcement, market structure, institutional prerequisites for successful exchange, and policy. The paper closes with ideas for more advanced courses, e.g. asymmetric information, social preference, or institutional construction, yielding implications on efficiency and distribution.
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Papers by William Ferguson