Abstract
Theories of institutions can be classified into two broad approaches: institutions-as-rules and institutions-as-equilibria. According to the first approach, institutions are conceived as rules that guide the actions of individuals engaged in social interactions. On the other hand, the second approach views institutions as behavioral patterns. In order to have a complete picture of institutions, we need to take both approaches into consideration. Individuals construct mental models to produce expectations about institutions, while institutions make individual expectations relatively compatible. The main purpose of this paper is to develop a general framework within which it is possible to analyze coevolution of individual mental models and institutions.
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Notes
See, for example, Groenewegen et al. (2010) for an introduction of institutional economics.
According to Hodgson (2003, p. 164), “[h]abits themselves are formed through repetition of action and thought. They are influenced by prior activity and have durable self-sustaining qualities. Through their habits, individuals carry the marks of their own unique history.”
A common illustration of a pure coordination game is the choice between driving on the left or right side of the road. There are two pure strategy equilibria with identical payoffs: everyone drives on the left and everyone drives on the right. All individuals share some interest in avoiding the non-coordinated outcome: some drive on the left and others drive on the right. When more than one equilibrium are possible, a player’s choice of strategy is not fully determined by the payoffs.
Within Austrian economics, emergence is typically conflated with the notion of spontaneous order (Harper and Lewis 2012; Rosser 2012). Austrian economists use the concept of emergence to explain how the interplay between the actions of numerous, independent individuals can generate an order which is not part of anyone’s intentions.
For Hodgson (2004), the phenomena that link agency and institutional structure are habits and processes of habituation. Habits themselves are formed through repetition of action and thought.
The following conceptualization of an institution is proposed by Aoki (2007). “An institution is self-sustaining, salient patterns of social interactions, as represented by meaningful rules that every agent knows and are incorporated an agent’s shared belief about how the game is played and to be played” (Aoki 2007, p. 6).
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Teraji, S. Understanding coevolution of mind and society: institutions-as-rules and institutions-as-equilibria. Mind Soc 16, 95–112 (2017). https://doi.org/10.1007/s11299-016-0196-1
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DOI: https://doi.org/10.1007/s11299-016-0196-1