Materials for the course Economic Organizations, Institutions and Markets.

Syllabus and information on seminars

CASE-BASED INTRODUCTION

0. Three Cases linking Business Econ. and Econ. Org., Instit. & Markets courses

• Case 1. Taxi regulation
• Case 2. Public bureaucracy
• Case 3. Corporate Social Responsibility (CSR), or Environmental, Social & Governance (ESG)
• Slides
• Clippings (zip).

BLOCK 1: INDIVIDUAL BEHAVIOR

1. Role of rationality

Readings:

• Stanovitch, K.E. (2021), “The Need for Rationality in a Hostile World,” Quillette, November 8.
• Arruñada, B. (2005), “Human Nature and Institutions”, in E. Brousseau and J.-M. Glachant, eds., New Institutional Economics: A Guidebook, Cambridge University Press, Cambridge.
• Nicholson, N. (1998), "How Hardwired Is Human Behavior?" Harvard Business Review, July, 135-47.

Complements:

• PPTs: Role of rationality. Older, more detailed, PPTs: Introduction to altruism and rationality. Business applications.
• Examples for discussion: Civic honesty around the globe, Evolutionary psychology (zip), Business applications (zip).
• The Economist (2010), "Homo Administrans," September 23.
• Videos:
• These TED short talks by leading scientists provide a general introduction (focusing on what do we find cute, sexy, sweet, funny) and analyses of specific mental modules, such as love, optimism bias, happiness, consciousnes by Dennett or Damasio, postponing gratification, as well as more general issues including how our brains work (14 videos!) and talks by S. Pinker. I'd suggest for you to watch at least one video of particular interest to you. If your interests lie elsewhere, you may easily search at TED for videos on other traits and emotions. Note that for most of these videos you can activate Spanish or (better) English subtitles.
• Videos on business applications: an excellent introduction to decisional biases with many hints to marketing applications, a famous video by the COO of Facebook, discussing the difficulties faced by women in their professional careers, Galloway on branding, and advice grounded on Evolutionary Psychology for some basic skills (how to speak, how to write).
• Introductions to Evolutionary Psychology: (1) Short: Carr, G., “The Proper Study of Mankind”, The Economist, December 20, 2005. Link to interview with author (12 minutes). (2) Technical: Cosmides, L., and J. Tooby (1997), "Evolutionary Psychology: A Primer", CEP, University of California, Santa Barbara.

2. Incentive management

Readings:

• Cowen, T. (2007), “How to Control the World: The Basics,” Chapter 2 in Discover Your Inner Economist, Penguin, New York, 11-29.
• Fehr, E., and A. Falk (2002), “Psychological Foundations of Incentives,” European Economic Review, 46 (4-5), 687-724. Excerpts you must read. Full article (complementary).

Complements:

• PowerPoint: Managing incentives.
• Examples for discussion (zip).

BLOCK 2: ECONOMIC ORGANIZATION

3. Markets and organizations. Divisionalization

Readings:

• Roberts, J. (2007), The Modern Firm: Organizational Design for Performance and Growth, 1st ed., Oxford University Press, Oxford, 88-103.
• Jensen, M.C., and W.C. Meckling (1998), “Specific Knowledge and Divisional Performance Measurement”, in Foundations of Organizational Strategy, Chapter 12. Harvard University Press.
• Arruñada, B. (2025), “Markets for Public Services: Less Might Be More”, March 26.

Complements:

• PowerPoint
• Examples for discussion (zip)

4. Markets and politics

Readings:

• Please, review first the topics on market and political failures studied in Microeconomics and Business Economics courses.
• Hayek, F.A. (1945), “The Use of Knowledge in Society”, American Economic Review, 35(4), 519-530.
• Frank, R. H. (2007), Microeconomics and Behavior, 9th ed., McGraw-Hill, New York (excerpts from Ch. 16, “Externalities, Property Rights, and The Coase Theorem”).
• Coase, R. H. (1960), “The Problem of Social Cost”, Journal of Law and Economics, 3(October), 1-44.

Complements:

• PowerPoint: Markets and Politics
• Examples for discussion: 1 Hayek (zip), 2 Coase (zip).
• Other complements: (1) Study guide of Hayek and Coase with a text from Varian (zip file). (2) The market for news. (3) The European market for pollution permits: Website and Macromedia on how it works.

BLOCK 3: THE INSTITUTIONAL ENVIRONMENT

5. Institutional support of private contracting

Readings:

• Arruñada, B. (2001), “The Role of Institutions in the Contractual Process”, in B. Deffains and T. Kirat, eds., Law and Economics in Civil Law Countries, Elsevier, Amsterdam, 149-67.
• Cooter, R. and T. Ulen (2007), “Fill in a Form: Contracts of Adhesion,” in Law and Economics, Pearson International, Boston, MA, 302-304.

Complements:

• PowerPoint: Institutional support of contracting.
• Examples for discussion (zip).
• The World Bank's Doing Business report. Discussion and articles.

6. Role of business firms in society

Readings:

• Arrow, J.K. (1973), “Social Responsibility and Economic Efficiency,” Public Policy, 21.
• Friedman, M. (1970), “The Social Responsibility of Business is to Increase its Profits”, New York Times Magazine, September 13.
• Franklin, D. (2008), “Just Good Business”, The Economist, January 17.
• Hart, O., and L. Zingales (2017). “Serving Shareholders Doesn’t Mean Putting Profit Above All Else”, Harvard Business Review, October 12.
• Crook, C. (2005), “The Good Company” (Survey on “Corporate Social Responsibility”), The Economist, January 20. Video.
• The Economist (2022), “A Broken Idea: Special Report. ESG Investing”, The Economist, July 23.

Complements:

• PowerPoint: Firms and Society.
• Examples for discussion (zip)
• Hayek, F.A. (1998), “The Weasel Word ‘Social’”, in The Fatal Conceit: The Errors of Socialism, University of Chicago Press, Chicago, 114-19.