Institutionalism as a Methodology

Abstract

We provide a definition of institutionalism and a schematic account that differentiates between institutional theories (in which institutions are exogenous) and theories of institutions, in which some (but not necessarily all) institutions are endogenous. Our primary argument is that institutionalism in the contemporary context is better characterized as a method than as a body of substantive work motivated by the so-called chaos problem. Secondary arguments include the following. (1) While it is important to differentiate sharply between institutions and behavior, institutionalism presupposes a well-defined behavioral concept. (2) When making the challenging transition from developing institutional theories to developing theories of institutions, it is essential to hold behavioral axioms fixed and to choose a form of equilibrium that exists for the class of games studied. (3) For most research programs today, a form of Nash equilibrium has the requisite properties while the core, and structure-induced equilibria (SIE) that rely on the core, often lack the requisite properties.