To Trust or to Control: Informal Value Transfer Systems and Computational Analysis in Institutional Economics

Abstract:

This article illustrates the usefulness of computational methods for the investigation of institutions. As an example, we use a computational agent-based model to study the role of general trust and social control in informal value transfer systems (IVTS). We find that the terms of interaction between general trust and social control have an impact on how IVTS work, become stable, and prove highly effective. The case shows how computational models may help (i) to operationalize institutional theory and to clarify the functioning of institutions; (ii) to test the logical consistency of alternative hypotheses about institutions; and (iii) to relate institutionalist theory with other paradigms and to practice an interested pluralism.

Keywords::

• agent-based computational economics
• evolutionary-institutional economics
• general trust
• informal value transfer systems
• social control

JEL Classification Codes::

• C63
• C72
• D02
• F33
• G23

Notes

¹ We clarify some fundamentals of ABMs. For a more extensive introduction, see Leigh Tesfatsion (2017), and for the ABM meta-theoretical affinity to institutionalism, see Claudius Gräbner (2016).

² The results of the full model go beyond what we describe in this section. For a more extensive description and interpretation see Gräbner, Elsner, and Lascaux (2017).

³ For a discussion of the underlying mechanisms, see Gräbner, Elsner, and Lascaux (2017).

Additional information

Notes on contributors

Claudius Gräbner

Claudius Gräbner is a research associate at the Institute for the Comprehensive Analysis of the Economy (ICAE) at the Johannes Kepler University of Linz (Austria).

Wolfram Elsner

Wolfram Elsner is a (retired) professor of economics in the Faculty of Business Studies and Economics at the University of Bremen (Germany).

Alexander Lascaux

Alexander Lascaux is a professor of strategic management at the Russian Presidential Academy of National Economy in Moscow (Russia), and a guest researcher at the University of Hertfordshire (UK).