A few yeas ago, I gave a talk on how institutions emerge endogenously to enable people to capture the gains from trade in the face of potential opportunism.
Except I didn’t use any of those words. My talk was about commitments and how people make them credible.
Most economic problems have a commitment dimension because most economic problems deal with the future. As I tell my “Law and Econ” students, you can read the classic “I, Pencil” with an eye toward contracts, as much as toward prices! Anonymous exchange coordinated through time requires a series of credible commitments or else the pencil will never arrive on your store shelf.
In my talk, I discuss one classic and two unique (to my knowledge) examples of credible commitments.
The classic example comes from Margaret Brinig’s excellent paper, “Rings and Promises.”
My first unique example comes from the world of digital privacy about which I’ll write a follow-up post.
My second unique example comes from the very interesting case of Cummins Engine Company and its relationship with the municipal government in Columbus, Indiana. To learn more about that case, see these videos or read my paper with Dylan DelliSanti.