Advancing Socio-Economics: An Institutionalist Perspective

Table of Contents
Preface

Contributors Biographies

Part I On Socio-Economic Concepts and Methods

Part III On Social Systems of Production-and Beyond

Part II On Institutions    J. Rogers Hollingsworth, Karl H. Müller

Many of the essays in this volume assume that institutions are rules, norms, habits, conventions, and values, and that these are among the major determinants of the social world. These assumptions are explicitly articulated in the following chapters by J. Rogers Hollingsworth and by Tom Burns and Marcus Carson. In these two essays, they develop a theory about rules systems. For them, social rule systems are collectively shared, and they structure and regulate most forms of social behavior. Geoffrey Hodgson, not only in the essay which follows, but in much of his other work, has demonstrated that rules and norms tend to structure social interaction by specifying who may participate in relationships, how participants should conduct themselves, and what the goals of participants are. In short, they influence who does what, when, where, and how. As a result, rule systems permit patterns of social action and interactions among actors to be predictable. Without consensus on rules and norms, there would be difficulty in establishing order, stability, and continuity in social life.

Rules and norms are learned in many ways, but many are part of social traditions to which individuals are socialized as children. As a result, most rules and norms are never questioned. It is through such a pattern of learning that one acquires an understanding of one's rights, responsibilities, and obligations. And it is through rules, norms, habits, and conventions that one learns how to participate in specific situations, to understand which behaviors are frowned upon by society, and to be aware of which kinds of behavior are rewarded.

Modern societies are highly differentiated into a variety of important subsystems, each with its own rules and norms. These subsystems include the business system, the system of education and science, the financial system, and the industrial relations system. The various institutional arrangements (e.g., markets, associations, networks) of a society also have their logics and rules for the coordination of various actors. Despite the differentiated nature of modern societies, there are meta-rules which are collectively shared throughout the society. It is the collective sharing of meta-rules which permits linkage of the various sub-systems together. But in the final analysis, the degree of coherence among the various sub-systems in each society must be determined empirically. The different sub-systems may be either loosely or tightly coupled. Through meta-rules and higher order meta-systems, societies attempt to deal with their societal contradictions and to bring about some degree of integration in the entire social system.

Rules and norms are intricately related with a society's institutional arrangements (i.e., markets, the state, associations, network) for coordinating relationships among social actors. Thus, if the rules and norms of a society are such that people have a very low degree of trust beyond the family and if they will cooperate only under a set of highly formal rules and regulations, then the state must become highly involved in establishing regulations for the governance of the society. "Widespread distrust in a society . . . imposes a kind of tax on all forms of economic activity, a tax that high-trust societies do not have to pay" (Fukuyama, 1995: 27-28). Without an understanding of a society's rules and norms, it will be very difficult to comprehend each of its institutional arrangements. While Burns and Carson have a very rich theoretical statement about role systems in the essay which follows, the next task that we should confront is to comprehend the relationship between the society's rules and norms and each of the institutional arrangements of a society.

All contemporary capitalist societies consist of a variety of social actors who continually engage in diverse interactions with each other. As Claus Offe suggests in chapter 10, relationships among actors are coordinated by different institutional arrangements (e.g., markets, states, networks, associations). The institutional arrangements which are the dominant forms for coordination in a society are very much influenced by the norms, rules, conventions, habits, and values which are prevalent in a society. In other words, in each society some institutional arrangements are more dominant than others. But in no society does any single institutional arrangement coordinate relationships among actors. There are always configurations of institutional arrangements, even though one institutional arrangement may be more important than others. Thus, in Switzerland and Austria, associations are far more important in coordinating actors than is the case in the British, American, and Canadian societies. But in Switzerland and Austria, associations alone do not coordinate economic actors, as the state and the market are also very important coordinating mechanisms. In these societies, all three institutional arrangements make up a configuration in order to coordinate economic actors.

Historically, the state has permitted associations in some societies to engage in cartel-type behavior, while elsewhere, cartels are forbidden, and associations, instead of fixing prices and determining the quality of output of certain products, serve the function of lobbying and providing information to customers about the quality of products. And prices are determined more by markets rather than by associations. In short, the way that associations, the state, markets, and networks configure to coordinate social relations varies from society to society.

The meta-norms and rules of a society structure the constellations or configurations of institutional arrangements, and in all societies, there is a logic with which these configurations behave. One of the chief tasks of institutional analysis is to comprehend this logic. The configurative logics of institutional arrangements shape relationships within and among institutional sectors, such as the business system, the system of research, the system of education, etc.

The configuration of institutional arrangements in a society is not necessarily the most efficient means of coordinating economic activity nor should it be viewed as part of some universal pattern of development. In chapter 9, Frans van Waarden demonstrates in his arguments about path dependency that the potential for a society to change its configuration of institutional arrangements is always limited or constrained by the dominant norms, rules, habits, conventions, and values. And these configurations evolve with a logic which is somewhat societally specific. Thus, the dominant rules and norms of a society influence the configurations of institutional arrangements, and both of these institutional components influence the structure and behavior of institutional sectors of a society.

All of this becomes very apparent when one engages in comparative institutional analysis of total societies. For example, many scholars (Orru, Biggart, and Hamilton, 1991; Gerlach, 1992) point out that East Asian societies are coordinated by configurations in which networks are the dominant institutional arrangement, but the logic with which networks coordinate relationships varies from society to society. These different logics have enormous implications for how each society organizes its business system and education system, its industrial relations system, its financial markets, and the state. Thus, Japan has had a configuration of institutional arrangements which has evolved according to a communitarian logic, Korea according to a patrimonial logic, and Taiwan according to patrilineal logic. And within each society, there is a kind of isomorphism in the forms of coordination of actors in different societal sectors, as the forms of coordination of each institutional sector (the business system, industrial relations system, financial markets, etc.) have evolved according to a common logic.

But in Anglo-American societies, there is a vastly different form of logic which has influenced the development of institutional arrangements. There, the institutional arrangements have evolved from a set of rules and norms by which individuals have been very much engaged in the pursuit of individual self-interest, with much less concern with the communitarian-type norms and rules so prevalent in East Asian societies. As a result of the American-type logic, the market has become far more dominant in the configuration of institutional arrangements than has been the case in any East Asian societies. Rules and norms in Anglo-American societies emphasize individual rights and obligations. Whereas East Asian societies have configurations of institutional arrangements which facilitate close relationships among social actors, in Anglo-American societies, the configurative logics influence tendencies toward individualism and arm's length transactions. Thus, in the business systems of Anglo-American societies, buyers tend to favor suppliers who provide goods at the lowest price, whereas in East Asian societies, buyers prefer suppliers with whom they have long-established relationships (Gerlach, 1992).

Offe in chapter 10 employs a strategy for explaining institutional arrangements very different from most state and Marxist theorists. Most state and Marxist theorists attempt to explain the role and structure of the state in terms of the functions it performs for the economy. In short, the economy shapes the role of the state, which is to sustain a well-functioning capitalist economy. Most neoclassical market theorists assume that the economy is made up of large numbers of rationally calculating individuals who are engaged in the pursuit of individual self-interests, and that the aggregation of individuals through spontaneous and voluntaristic action can construct their world (Williamson, 1985). This mixing of full rationalist with market competition is expected to produce whatever institutions are necessary to coordinate a complex capitalist economy.

In the essays which follow, the authors suggest in varying degrees that the coordinating mechanisms of modern societies have configurative coordinating structures, each containing the state. However, the role and structure, not only of the state but also of the entire configuration of coordinating mechanisms, vary across societies. Each configurative structure should be seen as a larger effort to legitimate a system of rules, norms, habits, conventions, and values which have evolved in a society's history. In no society has the configurative institutional arrangement been determined exclusively or primarily by the economy. The strength of the state relative to the other institutional arrangements (associations, markets, networks, etc.) has varied considerably. As Hollingsworth suggests, it is the configurative institutional arrangements of each society which are very important in influencing the structure and behavior of societal sectors, the organizational structures across sectors within each society, and the overall performance of the society.

Table of Contents
Preface

Contributors Biographies

Part I On Socio-Economic Concepts and Methods

Part III On Social Systems of Production-and Beyond
Rogers Hollingsworth Homepage

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