Institutions and economic change: some notes on self-organization, power and learning in human organizations

Abstract

This paper provides a compact overview of the interpretations of the “primitive entities” constituting the social fabric of economic systems according to different social science traditions. In our view, it is possible to reconstruct two meta-narratives on the origins of the theoretical primitives which are at the roots of different social sciences approaches. The first narrative argues that ‘once upon a time’ there were individuals with well-structured and coherent preferences and with adequate cognitive algorithms which allowed them to take systematically rationally consistent decisions. At the beginning of history, they met and, conditional on the technologies available, undertook mutually beneficial exchanges or, when this was not possible due to technological non-convexities, trading difficulties or problems of contract enforcement, built organizations. In the alternative tale, at the beginning of history, there were immediately factors of socialization like families and social norms, which shaped desires, representations and, possibly, cognitive abilities of the agents. In this perspective, non-exchange mechanisms of interactions (authority, violence and persuasion) which establish the adaptation of agents to specific social roles appear in the explanation from the start. Here ‘institutions’ are the primitives, while ‘preferences’ and the very idea of ‘rationality’ are derived entities. Which of the two meta-narrative is chosen bears far-reaching implications for the interpretation of institutions and organizations and their transformations.