Missing Middles, Magical Words, and Leaps of Imagination in the Original Institutionalists' Theory of Behavior

Abstract

All science makes an attempt to “carve nature at its joints” to study aspects of reality in isolation. Then the insights gained must be reconnected with the whole of nature. This reconnection is difficult and problematic. Additionally, there are gaps in our understanding regarding the nature of the reconnection. This leaves gaps in our understanding. Filling these gaps sometimes requires what Jacob Bronowski called “leaps of imagination.” This is precisely where creativity comes into play in all science. This paper explores the problems of reconnection and the creative ways we employ “leaps of imagination” in Institutional Economic theorizing. These are both epistemological and methodological problems that occur and are unavoidable in all science. These gaps are the missing middles and “leaps of imagination” are the magical thinking. I wish to explore the attempts in institutional economics to fill one of our most persistent gaps; that is the way individual habits and routines become social habits and routines. This is fundament to the institutionalist theory of behavior, the evolution of institutions, and the process of how they change. Thorstein Veblen's attempt to fill the gap is discussed as is Geoffrey Hodgson and Thorbjøn Knudsen's attempt to fill additional gaps in the discussion of institutions.

Keywords:

• institutions
• evolutions
• leaps of imagination

JEL Classification Codes:

• B4
• B5

Notes

1 I would like to thank my colleague Jacob Powell for bringing this text to my attention.

2 Emulation has taken on a different meaning from imitation since Veblen’s time, likely because of Veblen’s usage. Emulation is now generally defined as imitation for the purpose of maintaining or attaining status.

3 Hodgson and Knudsen note that habits of thought, being unobservable, require a pre-existing language structure in order to be shared (190–193). Also, the socialization of children is obviously a way such habits of thought or routines are spread through-out a community.

4 I am employing the terminology as defined in Hodgson and Knudsen (2010) so as not to needlessly confuse the discussion by using alternative definitions at different points in the argument.

5 Even individual habit (of both thought and practice) develop in a social/cultural context, so there is already an important social element in play.

6 The institutionalists (OIE) reject assuming atomistic human behavior can exist and argue that self-interest is not part of human nature but instead is learned aspect of behavior. Institutionalists, for the most part, have avoided employing formal models of behavior requiring reattaching a closed model to an open system, so reattachment to evolutionary and cultural narratives is easier.

7 Veblen does not write very much on this. Consider, the following: “The life of man in society, just as the life of other species, is a struggle for existence, and therefore it is a process of selective adaptation. The evolution of social structure has been a process of natural selection of institutions. The progress of which has been and is being made in human institutions and in human character may be set down, broadly, to a natural selection of the fittest habits of thought and to a process of enforced adaptation of individuals to an environment which has progressively changed with the growth of the community and with the changing institutions under which men have lived. Institutions are not only themselves the result of a selective and adaptive process which shapes the prevailing or dominant types of spiritual attitude and aptitudes; they are at the same time special methods of life and human relations and are therefore in their turn efficient factors of selection. So that the changing institutions in their turn make for a further selection of individuals endowed with the fittest temperament, and a further adaptation of individual temperament and habits to the changing environment through the formation of new institutions. (Veblen [1899] 1953, 188) Different authors have interpreted this passage in highly contradictory ways.

8 Of course, the cultural contact experienced by modern day hunter-gatherer societies has been far from benign. Imperialism, forced cultural contact, and many other manifestations of the role of the power of external influences is an important part of this story.

9 See Dugger (1980).

10 There is also the problem that emergence is essentially the end of a processual account of a phenomenon. The process of explanation stops there. Also, once we do understand a process of emergence it stops being emergence and becomes simply, a causal explanation. The fact we cannot currently explain a phenomenon does not mean we never will be able to construct a causal, processual explanation. There is the possibility that certain phenomena are truly uncertain in a Keynesian way and therefore are simply unexplainable.

11 I prefer novelty to emergence because it carries the implication of being of unknown origin. Emergence is the process of coming into being, which, for me, implies we know what the actual process is, when in fact, we do not.

12 All of this fits into an evolutionary framework that is an open-system framework. Complexity economists have recognized this problem as the need for an additional step in analysis between micro and macro levels of analysis they refer to a meso level of analysis. Other complexity economists develop mathematical models that generate emergence, but this is a mathematical artifact in a closed system that tells us little about the actual process of the appearance of novelty in social systems.

13 Specifically, they note: “There is thus no stable environment to generate standard Darwinian selection, making it much less likely that Veblen meant to argue for analogies between biological selection mechanisms and cultural selection and adaptation.” (Jennings and Waller 1998, 213)

14 A very insightful discussion of such matters occurs in Cordes et al. 2021.

Additional information

Notes on contributors

William Waller

William Waller is Professor of Economics at Hobart and William Smith Colleges. This article was conceived and researched when he was the Helen Cam Visiting Fellow at Girton College, Cambridge University. Jacob Powell and Mary Wrenn contributed important insights into the development of this article.