Chapter 4

Question 1

Institutions

Answer 1

the humanly devised constraints that structure political, economic, and social interaction.

consist of both informal constraints and formal rules

“rules of the game”

Question 2

informal constraints

Answer 2

sanctions, taboos, customs, traditions, codes of conduct

Question 3

formal rules

Answer 3

constitutions, laws, property rights

Question 4

Property Rights

Answer 4

control over one’s own person and decisions

control over such personal property as automobiles and clothing

control over equipment and capital, and

control over such intangibles as ideas, inventions, music and writings and the exclusive right to use the property and derive income from use and the inclusive right to sell the property

Question 5

Common-Law countries

Answer 5

• more secure property rights & greater freedom in contracting
• larger and more developed financial markets
• fewer impediments for new forms to start businesses
• better-functioning labor markets, with lower unemployment rates
• more efficient court systems
• faster economic growth

Question 6

Market Design

Answer 6

mechanism that organize buying and selling;

while design does not control what happens in the market..it shapes and supports the process if transacting.

Question 7

British Policies

Answer 7

• Currency Act
• Sugar Act
• The Stamp Act
• Declaratory Act
• Townshend Acts
• Tea Act
• The Intolerable Acts
• The Quebec Act

Question 8

Property Rights

Answer 8

• owners of most types of property are required to pay taxes or forfeit their property to the government
• property is subjects to liens, foreclosures, and repossessions in cases of non-payment
• rights are also limited through zoning restrictions, which can affect the value of the property and the incentives to improve it
• 5th and 14th amendment limit govt’s ability to take property for “public use” without “just compensation”