Abstract
Theories of institutions can be classified into two broad approaches: institutions-as-rules and institutions-as-equilibria. Institutional structures and individual actions coevolve. In order to have a complete picture of institutions in interactions between structure and agency, we need to take both approaches into consideration. In the mental dimension, institutions guide individual behavior and thought. In the emergence dimension, the equilibrium state is generated as the result of actions chosen by individual agents. The mind is endogenous to the individual’s environment, which implies that expectations are also endogenous to the individual’s environment. Shifts in mental models change individuals’ plans and actions, which, in turn, leads to institutional evolution. A key to understanding institutional evolution is an understanding of how individuals modify their mental models.
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Notes
- 1.
Recently, coevolution denotes very different types of interactions: biological–cultural, ecological–economic, production–consumption, technology–preferences, behavior–institution, and human genetic–cultural (Durham ; Gowdy 1994) 1991.
- 2.
The famous ‘impartial spectator,’ a hypothetical ‘man within the breast,’ helps us to look at the various needs and to determine what, in each situation, is the proper balance between our needs and those of others.
- 3.
Children as young as 3 years can appreciate the difference between mental and physical entities (Wellman and Estes 1986 ).
- 4.
Akerlof and Dickens ( 1982 ) constitute the model of cognitive dissonance in economics. In their model, agents select their beliefs to minimize the dissonance experienced.
- 5.
Martin and Sunley ( 2012 ) consider three orders of emergence in economic geography. Specifically, second-order emergence is said to be characteristic of self-organizing systems. Second-order emergence is characterized by the emergence of self-organized macro-level morphology arising from the recursive amplifying interactions among the micro components.
- 6.
Searle ( 2005 ) claims that an institution is any system of constitutive rules of the form ‘X counts as Y in C,’ where X is a pre-institutional entity, Y is a status function, and C refers to the domain of application of the rule.
- 7.
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.
- 8.
In Crawford and Ostrom ( 1995 ), Lewis ( 1969 ), Ullmann-Margalit ( 1977 ), and Coleman ( 1987 ) are characterized as an institutions-as-norms approach. This approach assumes that many observed patterns of interaction are based upon the shared perceptions among a group of individuals of proper and improper behavior in particular situations.
- 9.
- 10.
For Hodgson, the phenomena that link agency and institutional structure are habits and processes of habituation. Habits themselves are formed through repetition of action and thought.
- 11.
In Aoki ( 2007 ), the following conceptualization of an institution is proposed: “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. (2016). Coevolution of Mind and Society. In: Evolving Norms. Palgrave Advances in Behavioral Economics. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-50247-6_6
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DOI: https://doi.org/10.1057/978-1-137-50247-6_6
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