Notebooks

## Institutions and Organizations

27 Nov 2021 22:19

Institutions keep society from falling apart, provided that there is something to keep institutions from falling apart.
---Jon Elster, Nuts and Bolts for the Social Sciences, ch. 15
Institutional economics (old-style à la Commons; neo-institutional à la Douglass North; new institutional à la Williamson). Empirical studies of different sorts of economic institutions. Industrial organization and market structure (institutions beyond the bounds of any one formal organization). Organization theory. Theories of institutional change, formation. Difference between institutions which are products of policy and those which are products of custom. (Intermediate cases abound naturally.) Evolutionary economics. Memes. Institutional design. Centralized vs. decentralized institutions. Corruption. Distribution of power vs. formal organization. History of bureaucracy and other sorts of formal organization. (Did Europeans take civil service exams from China? How did they evolve in China?) Game-theoretic approaches. Simulations. Spontaneous formation of institutions. How, exactly, do "institutions matter" in economic development and growth?
Recommended, big picture:
• Kenneth Arrow
• James Beniger, The Control Revolution: Technological and Economic Origins of the Information Society [Review]
• Samuel Bowles, Microeconomics: Behavior, Institutions, and Evolution
• Thráinn Eggertsson, Economic Behavior and Institutions [Review: Homo economicus on the Grand Tour, or, When Is a Lizard a Good Enough Dragon for Government Work?]
• F. A. Hayek, "Use of Knowledge in Society" and "Economics and Knowledge" in Individualism and Economic Order
• Albert O. Hirschman, Exit, Voice and Loyalty
• Jack Knight, Institutions and Social Conflict
• Gary J. Miller, Managerial Dilemmas: The Political Economy of Hierarchy [Review by Steve Laniel]
• Douglass North, Institutions, Institutional Change and Economic Performance
• Mancur Olson, The Logic of Collective Action [How groups work, and why volunteerism is almost never sufficient to secure public goods. (Short version: if it's a public good, i.e. one from which everyone benefits without exclusion, why should you put yourself out to secure it? Surely somebody else will... Olson provides a detailed economic analysis to flesh this out.) How interest groups work, why people won't show up to union meetings but will overwhelmingly vote to make union membership compulsory, taxes and government, the weakness of large classes, etc., etc. Brilliant.]
• Elinor Ostrom
• Understanding Institutional Diversity in Open Societies [partial online draft]
• Governing the Commons
• Thomas Schelling, Micromotives and Macrobehavior
Recommended, close-ups:
• F. G. Bailey, Humbuggery and Manipulation: The Art of Leadership
• Roland Bénabou, "Groupthink: Collective Delusions in Organizations and Markets" [PDF preprint. A really brilliant paper on "individually rational collective reality denial in groups, organizations and markets".]
• Samuel Bowles, "The coevolution of institutions and preferences: History and theory", SFI Working Paper 09-04-008 [PDF]
• Samuel Bowles and Herbert Gintis, "The Evolutionary Basis of Collective Action", forthcoming in the Oxford Handbook of Political Economy [PDF preprint]
• Samuel Bowles and Suresh Naidu, "Persistent Institutions" [PDF preprint]
• Andy Clark, "Economic Reason: The Interplay of Individual Learning and External Structure" [PDF reprint]
• Colin Crouch and Henry Farrell, "Breaking the Path of Institutional Development? Alternatives to the New Determinism", Rationality and Society 16 (2004): 5--43
• R. A. Dahl and C. E. Lindblom, Politics, Economics and Welfare: Planning and Politico-Economic Systems Resolved into Basic Social Processes
• Jerker Denrell, "Radical Organization Theory: An Incomplete Contract Approach to Power and Organizational Design", Rationality and Society12 (2000): 39--66 [My comments]
• Paul J. DiMaggio and Walter W. Powell, "The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields", American Sociological Review48 (1983): 147--160 [JSTOR. This is an interesting and deservedly-classic paper in sociology, which deals with an important issue, namely, why do so many organizations in the same field resemble each other so closely? One possibility would be that the common structure is the most efficient one, but they correctly point out that often the selective pressures which would need to be invoked to ensure this are weak or even absent, yet the similarity is there. They instead consider a range of alternative mechanisms, which all sound plausible and indeed one can see at work all around. The point I want to peeve about, however, is their name. In mathematics, an isomorphism is an invertible mapping between two domains which preserves some structure or property. For instance, the binary relation $R$ on a domain $A$ is isomorphic to the binary relation $S$ on the domain $B$ when there is a function $\phi: A \mapsto B$ such that (i) $a_1 R a_2 \Leftrightarrow \phi(a_1) S \phi(a_2)$ and (ii) the inverse function $phi^{-1}$ is well defined, so (iii) $b_1 S b_2 \Leftrightarrow \phi^{-1}(b_1) R \phi^{-1}(b_2)$. (You can fill in how things go for higher-order relations.) "Isomorphism" thus isn't a name for similar structure, it's a name for identical structure. One could apply this to organizations: define a bunch of relations $R_1, R_2, \ldots R_k$ for organization $A$ (relations of formal authority, informal interaction, etc., etc.), and similarly $S_1, S_2, \ldots S_k$ for organization $B$, and demand that the same mapping $\phi$ be an isomorphism for each pair $R_i, S_i$ at once. But this is a much stronger notion of similarity than DiMaggio and Powell are working with, or could reasonably want. (For instance it straightforwardly implies that $A$ and $B$ must have the same cardinality, so a small organization could not be isomorphic to a larger one.) They plainly want some notion of similarity of structure which comes in degrees and is not, in fact, isomorphism.]
• Steven N. Durlauf and H. Peyton Young (eds.), Social Dynamics
• Henry Farrell and Jack Knight, "Trust and Institutional Compliance" [Thanks to Henry for a preprint]
• John Kenneth Galbraith, The New Industrial State
• Uri Gneezy and Aldo Rustichini, "A Fine Is a Price", Journal of Legal Studies 29 (2000): 1--17
• Bennett Harrison, Lean and Mean [As an example of how to analyze a particular set of institutions and formal organizations]
• Rakesh Khurana, Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs
• James March and Herbert Simon, Organizations
• Herbert Simon, "Organizations and Markets," Journal of Economic Perspectives, 5 (1991) 25--44 [Collected in Models of Bounded Rationality, vol. III; see also ch. 2 of his Sciences of the Artificial]
• H. Preyton Young, Individual Strategy and Social Structure: An Evolutionary Theory of Institutions [Review: A Myopic (and Sometimes Blind) Eye on the Main Chance, or, the Origins of Custom]
To finish writing:
• Henry Farrell and CRS, "Selection, Evolution and Rational Choice Institutionalism "
• CRS, "Institutions as Collective Degrees of Freedom"