How Institutions Learn: A Socio-Cognitive Perspective

By Stein, Johan | Journal of Economic Issues, September 1997 | Go to article overview

How Institutions Learn: A Socio-Cognitive Perspective


Stein, Johan, Journal of Economic Issues


The evolutionary economics of institutionalists rests on theories of human choice that are in clear opposition to those of neoclassicalists. Institutionalists reject the neoclassical assumption that the economic person's character is that of a fully informed, atomized, rational, and maximizing individual. Instead, they base their reasoning on a variety of theories of human choice. The purpose of this article is to suggest ways in which modern psychology can contribute to an understanding of institutions and institutional change.

Toward a Socio-Cognitive Theory of Human Choice

With advances in cognitive psychology, there exists today an empirically well-founded understanding of how individuals process information; this understanding allows us to avoid reducing the human mind to a black box. This, in turn, allows us to understand the complexity underlying human choice and social processes. In the light of the modern findings of cognitive psychology, traditional institutionalist theory appears to be based on a somewhat reductionistic perspective of the human mind. Although institutionalist thought more or less paralleled the early development of psychology, the recent contributions to cognitive psychology can barely be detected in institutionalism, even though these contributions appear to be widely adopted in other social sciences.

Cognitive psychology has its limitations. Like behavioral theory, cognitive psychology relies heavily on studies in experimental settings. As a result, social influences on the human mind are not given due recognition from an institutionalist perspective. Cognitive psychology that treats behavior as adaptive to individual experiences and cognitive processes is "undersocialized" from this perspective.

In this article, I present a socio-cognitive understanding of institutions and institutional evolution. This perspective incorporates a social, as well as a cognitive, dimension. In the social dimension, human behavior is related to intersubjectively shared and value-infused knowledge about "the way things are and the way things should be." Such knowledge is a part of social structures and processes. In the cognitive dimension, human behavior is related to the value-infused knowledge of collectives of individuals. Moreover, individuals act upon their interpretations of social exposures. From the social dimension, it then becomes important to consider how and to what extent interpretations are affected by social forces.

From the socio-cognitive perspective, ideas about reality are constructed through interactions that are processes of meaning creation. The recognition that human cognition needs to be included in the analysis of these processes does not mean that the socio-cognitive perspective should be equated with an individualistically voluntaristic standpoint. An analysis may very well reveal that human thought and behavior is to a large extent socially restricted in a given situation. On the other hand, an analysis may also disclose that individuals are ambiguous about how to interpret the situation and/or how to act. Hence, individualistically voluntaristic or socially deterministic findings are, from the socio-cognitive perspective, not set a priori.

Institutions as Structuration Principles

Some general assertions about institutions can be made [cf. Sjostrand 1993; Stein 1993]. An institution is a socially constructed belief system about the way things are and the way things should be that organizes human thought and action. An institution is not an objective physical phenomenon, but a human mental construct. Institutions are intersubjectively shared by a collective of individuals either consciously or unconsciously. Institutions range on a spectrum from being articulated to tacit. Finally, institutions can span across boundary-specific realms such as organizations. Hence, this synthesis pictures institutions as principles that govern the creation of meaning and the patterning of actions at various social levels. …

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