This paper relates Smith’s dictum that “the division of labor is limited by the extent of the market” to evidence from anthropology and sociobiology to offer an increasing returns model of the evolution of exchange institutions from autarky, through various intermediate stages, and finally to monetary exchange as the extent . . .
A number of models of increasing returns and path dependence in international trade and development involve the idea of aggregate demand spillovers (e.g. Shleifer & Vishny 1988) or externalities (e.g. Blanchard & Kiyotaki 1987). Murphy, Shleifer, & Vishny (1989), for example, take the Shleifer-Vishny model and conclude that “big push . . .
It is a commonplace in New Institutional economics that norms matter for economic performance. There remains, however, no deep integration of norms into the rational choice framework beyond merely shunting them into the black box of “preferences”. This paper first establishes the importance for social cooperation of specific and directive . . .