Creating Institutions for Survival Games Against Nature in Premodern Iceland

Abstract

"We are concerned here with the creation of non-market institutions for reducing the cost of risk in poor agrarian societies that operate at low levels of technology without the benefits of insurance, credit and other intertemporal markets. 1 Institutions, the formal and informal rules that order and constrain human relations, affect three critical aspects of economic performance: the distribution of wealth, the joint value of resources or aggregate output, and the variability over time in individual and communal income and consumption. Here we examine primarily the role of agrarian institutions in containing risk or variations in income and consumption, while realizing that institutional adjustment at one margin typically involves a sacrifice (opportunity cost) at some other margins. It is conceivable, for instance, that that informal insurance arrangements in traditional agrarian societies may stand in the way of economic development, as we shall consider below."