Informal Institutions, Social Capital And Contract Choosing

The influence of informal institutions to economy running has already been acknowledged by most literates. Through various cases and historical experiences, existing research and literatures validated the function of maintaining transaction orders fulfilled by informal institutions, and concluded that informal institutions efficiently make up the lack of governance in the transactions which are difficult for formal institutions to control. Contracts are tools for maintaining transaction process. The dominated contract theories involving theory of transaction cost (TCE) and property rights theory (PRT) limit their analysis of contract choosing mechanism to technical items involved in transactions, and ignore the affection to the mechanism from social environment. Both TCE and PRT focus on factors containing the physical attributes of elements involved in transactions and also technologies for measuring these attributes, such as asset specificity, stability of goods quality, the possibility to measure elements attributes and their changes in present technology conditions. They hold the idea that transaction cost in different transactions and, moreover, the optimized contract for those transactions are decided by the physical and technological factors. Therefore, most literates acknowledged the protecting function of informal institutions to transactions, but few of them took informal institutions into the analysis of contract choosing mechanism. This thesis tries to complete this work and find out the relation between informal institutions and contract choosing mechanism.Firstly, this thesis analyzed micro-basis for exist and running of informal institutions from the perspective of individual mental motivation. Informal institutions with forms as culture, norms and morality have both functions of belief coordinating and value commenting. The later one as the value attributes of informal institutions will enter into people's consciousness and change into their social preferences by the way of norm-innerlizing. Looking from both sufficiency and necessity angle, exist of social preferences is an important condition for self- maintenance of informal institutions, and also the basis for analyzing them in the micro-level.Secondly, this thesis analyzed mechanism of informal institution running from a theoretic perspective of social capital. For the purpose of restricting people's actions, informal institutions need to acquire adequate information to enforce sanctions. For their self-enforcement characteristic, informal institutions, taking horizontal relation networks as their carrier, diffuse information by the way of sharing environment and tactically experiencing, which can only feasible in the relation networks, and publish the rule-breaking behaviors through individual sanctions. The corresponding social preferences become the motivation of individual sanctions. And social capital as a structural concept, which integrates sanction motivation and network density, is a proper mean for measuring the capability of protecting cooperation in transactions from informal institutions.Thirdly, by using the contract enforcement as a breaking-point, this thesis analyzes the relation between informal institutions and the optimized contact mode for specific transactions. For getting the optimizing contract, choosing need to tradeoff between transactions and producing efficiency to minimize the transaction cost based on minimizing the enforcement cost. Contracts enforcement modes can be sorted to legal enforcement mode and non-legal enforcement mode. The efficiency of former one is attributed to the construction of contracts based on given technical condition, and that of the later one is attributed to informal institution environments shared by traders. With the increasing capacity of protecting cooperation in transactions of informal institutions, meaning that the increasing of social capital among traders, non-legal enforcement will become more efficient and the rate of the component of non-legal enforcement in the optimized contact will become higher. As so, traders will choose the contract mode which may be not convenient for state-enforcement, but could bring more cooperative profits and vice inverse.Lastly, through an economic experiment and the researches on experiences of development of industry associations in our country, this thesis validated the inverse relation between the rate of the component of legal enforcement in the optimized contact and social capital among traders, so as to show the affection form informal institutions as the environment for transactions to contract choosing.Through theoretic analysis, experiments and evidence from economy running, this thesis got these conclusions:First, informal institutions are shared value system holding specific social preferences as their individual micro basis.Second, self-restriction and individual sanctions in social networks are the main way for the self-maintenance of informal institutions.Third, the functional dimensionality of social capital limits the scope of informal institutions it contains, so social capital can be a proper mean for measuring the capability of protecting cooperation in transactions from informal institutions.Fourth, through affecting contract enforcement cost, informal institutions could affect contract choosing in specific transactions.Fifth, if taking industry associations as a bundle of complex transactions among associators, we can treat the governance form state organs as the component of legal enforcement in the contact which implements these transactions. And there is an inverse relation between social capital among associators and the intensity of the governance.