Identity and the Evolution of Institutions: Evidence from Partition and Interwar Poland

Abstract

This paper advances a logical, if possibly controversial, thesis: institutional design is inherently a product of identity, at both the individual and group level. Building on recent advances in identity economics and new institutional economics, this research shows how identity can be used to explain institutional genesis and the persistence of “inefficient” institutions. Applying this model to Poland in the nineteenth and early twentieth centuries, it is evident that the identity-based institutional building which had served individuals so well under occupation in Poland resulted in “inefficient” institutions, unsuited for the changing external environment. Only taking an identity lens to the Polish experience can we see a satisfactory explanation for the failure of institutions in interwar Poland.

Keywords:

• identity economics
• institutions
• Poland
• institutional change

JEL Classifications:

• B52
• N43
• Z13

Notes

¹ Figure 1 shows the intersection of the various levels of identity and institutions and how they are aggregated. The base level is that of the individual (the dashed square), influenced by intrinsic preferences and social networks which then forges an individual identity. The individual then carries this identity into various social groups (the solid circle), which may overlap or connect with other social groups and reinforces (or challenges) individual identities. The aggregation of these groups and their constituent identities then form what may be known as “national culture” at the country-level, which then, in turn, determines the formation of formal institutions.

² Given that one of the characteristics of institutions is their semi-permanent nature, this assertion would also imply, like Stryker (1980), that identity is also relatively stable.

³ This paper thus harkens back to early Austrian/Mengerian theories of collective entities as being explained by individual actions (Ahdieh, 2011).

⁴ As Hartwell (2013) notes, while some institutions may have political effects (such as property rights), this does not take away from the fact that the institution’s objective is primarily economic. Similarly, some institutions may shift their sphere of operation over time, with the Roman Catholic Church being a prime example: once the dominant political institution in Europe, it is now primarily socially-oriented, albeit exercising some measure of political power in countries such as Poland.

⁵ This does not mean that such identities are not transformed through the intersection and exposure to other individual identities, nor does it imply that individual identities remain static through absorption into a group dynamic. While an interesting area to explore, I am avoiding this debate here to merely note that individual identities necessarily inform larger, group-based identities, without specifying the functional form of those larger identities.

⁶ The reality of shifting identity, i.e. from worker to capitalist, may also explain why Marx’s prediction that workers would rise up once they realized their exploitation has not come to pass. That is, if one does not identify themselves as a worker but as a potential capitalist, revolution is not the answer.

⁷ Alternately, conceptions of efficiency are altered immensely by the identity considerations which go into the formation of institutions. In the case of Hitler Youth, it was judged as “efficient” on a different set of metrics than what a non-racially-based educational and socialization organization would be. Voigtländer and Voth (2015) show just how this was the case, with Hitler Youth effective in terms of spreading a certain identity.