Inside and Outside Perspectives on Legitimacy: The Implications of Incentive-Incompatibility
20 Pages Posted: 15 Jun 2018
Date Written: May 30, 2018
This paper discusses the implications of the impossibility of totally incentive-compatible social behavior, whether organizationally or politically. Specifically, drawing on the theory of cooperation, the paper argues for the existence of irreducible and irreconcilable “inside” and “outside” perspectives on social institutions; that is, between foundationalist and functionalist approaches, both of which have a long pedigree in political economy. The conflict between the two, and the practical impossibility of dispensing with either, poses a challenge for an ethical institutional economics.
Keywords: Game Theory, Cooperation, Institutions
JEL Classification: C73, A13
Suggested Citation: Suggested Citation