The aim of this workshop is to introduce the student to some recent empirical research that links corporate governance with financial sector design and economic growth. I will start out laying some theoratical foundations to the concepts of management and governance to link governance and financial contracting. The empirical papers then demonstrate that a sound legal system to ensure efficient financial contracting is a principal prerequisite for a well-operating financial sector and eventually economic growth. Some outlook to political economy research concludes the presentation.

During my workshop on theory building, we will talk about the scientific process rather abstractly. I am attaching a reading by Philosopher Feyerabend, who would probably disagree with the reading by Lazear wholeheartedly. I will run the workshop by discussing the opposing views, by embedding the discussion in scientific methodology in general, and in economics in particular, and by drawing attention to the scientific process in our particular environment, which is economics in a broader sense, and institutional economics in particular.

To brush up on the broader context, you may wish to reflect on the interrelation of the following terms: theory, reality, paradigm, model, variables, observation, truth, ideology, and possibly language and culture.

In general, you may read 'the classics' in epistemology if you haven't done so at some point during your education. Of later vintage, I can particularly recommend Thomas Kuhn's 'Structure of Scientific revolutions', or some epistemological essays by Einstein, who had an admirably clear way of writing. The daredevil would try to approach Wittgenstein's language philosophy, and continue to Luhmann's 'Social Systems', even though for us economists these have frighteningly little influence over our work.

For readings on the narrower scientific thought in the economic sciences, there is of course always Milton Friedman's classic in his 'Essays on positive Economics', which can be contrasted nicely with Hayek's trilogy 'Scientism and the study of society' - which was first published more than a decade before Friedman.

See you in Cargese!