Why Meso? On “Aggregation” and “Emergence”, and Why and How the Meso Level is Essential in Social Economics

Abstract

Simplistic aggregation in idealized “markets” versus structural emergence in complex and path-dependent processes have always marked a “continental divide” between neoclassical mainstream economics and all kinds of evolutionary and institutional social economics. This paper deals with institutional, or structural, emergence and argues that the meso level (to be specific) is the proper aggregate level for social economic analyses of complex systems and processes. Also, neo-Schumpeterian economists have stressed recently the issue of an “institutional trajectory” taking place on the meso economic level. This paper argues that the creative ideas of a Schumpeterian entrepreneur are not a sufficient explanation in this case. Using an evolutionary interpretation of a simple game-theoretic formalism (the Folk Theorem), the paper strives to demonstrate that the meso level, as the proper level of institutional emergence, must and can be endogenously explained from a process of interactive problem-solving of interdependent agents, in their struggle for coordination under strong uncertainty. It will be illustrated that a meso-sized socio-economic group co-evolves, and is constituted, together with the institution that in turn serves as the solution to the coordination problem. The practical and policy implications of the argument are discussed.