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From the new institutional economics to organization economics: with applications to corporate governance, government agencies, and legal institutions

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  • POSNER, RICHARD A.

Abstract

This paper applies the principles of organization economics (an offshoot of organization theory and a cousin of the New Institutional Economics) to a variety of organizations, mainly public ones. Organization economics seeks to understand and improve the ways in which organizations overcome agency costs, information costs, and other obstacles to efficiency. The private organization discussed in the paper is the modern publicly held (that is, dispersed ownership) business corporation, and the particular problem on which I focus is excessive executive compensation as a symptom of weaknesses in corporate governance. I then discuss two public organizations involved in national security – the US intelligence ‘community’ (a kind of mega-organization) and the Federal Bureau of Investigation in its role as the nation's principal domestic intelligence service. Both exhibit significant dysfunction that organization economics can help us to understand and overcome. I then discuss two types of public organization that have been more successful in overcoming obstacles to organizational efficiency: the judiciary of common law nations, such as the United States, and the very differently structured judiciary of civil law nations, such as France, Germany, and Japan.

Suggested Citation

  • Posner, Richard A., 2010. "From the new institutional economics to organization economics: with applications to corporate governance, government agencies, and legal institutions," Journal of Institutional Economics, Cambridge University Press, vol. 6(1), pages 1-37, March.
    • Handle: RePEc:cup:jinsec:v:6:y:2010:i:01:p:1-37_99
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    1. Ingrid Henriksen & Eoin McLaughlin & Paul Sharp, 2015. "Contracts and cooperation: the relative failure of the Irish dairy industry in the late nineteenth century reconsidered," European Review of Economic History, European Historical Economics Society, vol. 19(4), pages 412-431.
    2. Stefan Voigt, 2016. "Determinants of judicial efficiency: a survey," European Journal of Law and Economics, Springer, vol. 42(2), pages 183-208, October.
    3. Nuno Ferreira da Cruz & Pedro Simões & Rui Cunha Marques, 2013. "The Hurdles of Local Governments with Ppp Contracts in the Waste Sector," Environment and Planning C, , vol. 31(2), pages 292-307, April.
    4. Argandoña, Antonio, 2010. "From action theory to the theory of the firm," IESE Research Papers D/855, IESE Business School.
    5. Stremersch, S. & Winer, R.S. & Camacho, N.M.A., 2020. "Faculty Research Incentives and Business School Health: A New Perspective for Marketing," ERIM Report Series Research in Management ERS-2020-007-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    6. Storr, Virgil Henry & Grube, Laura E. & Haeffele-Balch, Stefanie, 2017. "Polycentric orders and post-disaster recovery: a case study of one Orthodox Jewish community following Hurricane Sandy," Journal of Institutional Economics, Cambridge University Press, vol. 13(4), pages 875-897, December.
    7. Benito Arruñada, 2021. "La seguridad jurídica en España. Documento de discusión (versión revisada y comentada)," Studies on the Spanish Economy eee2021-18, FEDEA.
    8. Blaeschke, Frédéric & Haug, Peter, 2014. "Does Intermunicipal Cooperation Increase Efficiency? Evidence from the Hessian Wastewater Sector," IWH Discussion Papers 11/2014, Halle Institute for Economic Research (IWH).
    9. Christophe Bellégo & Joeffrey Drouard, 2019. "Does It Pay to Fight Crime? Evidence From the Pacification of Slums in Rio de Janeiro," Working Papers 2019-08, Center for Research in Economics and Statistics.
    10. Stremersch, S. & Winer, R.S. & Camacho, N.M.A., 2020. "Faculty Research Incentives and Business School Health: A New Perspective from and for Marketing," ERIM Report Series Research in Management ERS-2020-013-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    11. da Cruz, Nuno F. & Marques, Rui Cunha, 2012. "Mixed companies and local governance: no man can serve two masters," LSE Research Online Documents on Economics 59778, London School of Economics and Political Science, LSE Library.
    12. Benito Arruñada, 2020. "La seguridad jurídica en España," Studies on the Spanish Economy eee2020-26, FEDEA.

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