The Institutional Origins of Crises for Economy and Ecology

By Underwood, Daniel A. | Journal of Economic Issues, June 1998 | Go to article overview
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The Institutional Origins of Crises for Economy and Ecology


Underwood, Daniel A., Journal of Economic Issues


The Fundamental Problem of Existence

All species share a common denominator in the struggle for survival: they must extract a constant flow of energy and materials from the environment to maintain the self-organized state of low entropy called life [Schrodinger 1967, 74-5]. Recognition of this fact reveals that all life forms are intimately dependent upon an external environment. This continuous flow of energy and materials taken from and eventually returned to the external environment is throughput. Human systems, like all other living systems, confront and must solve two fundamental problems. The first is "the imperious first rule of continued existence . . . [which stipulates that] . . . the human being must eat" [Heilbroner 1962, 1]. People solve this problem through provisioning, which parallels Karl Polanyi's "substantive concept [which can] be defined as an instituted process of interaction between man and his environment which results in a continuous supply of want-satisfying material means" [Polanyi 1968, 146]. Provisioning involves the identification, extraction, and processing of throughput, which is ultimately discharged as waste in the environment. Exchange and exchange relationships determine, channel, and direct throughput, thereby performing a fundamental social integration/coordination function [Boulding 1981, 163-82]. Exchange facilitates and retards access to throughput, the fundamental substance of life support. Ideally, the outcome of this process is "betterment" of the human condition.(1)

The second fundamental problem is that behavior of the environment is uncertain - unpredictable - and any solution to the provisioning problem must respond - cope - with changing environmental conditions. This is the problem of adaptability. Adaptability is the process whereby living systems assimilate and react to information flows from the environment about changes in the availability of throughput and develop new coping strategies [Conrad 1983, vii-x]. Adaptability requires modification of coping strategies to find new avenues for the identification, extraction, processing, exchange, and discharge of throughput.(2) Sequential, cumulative, and often irreversible coping strategies constitute evolution. In this context, evolution is the saga of coping strategies utilized by living systems to grapple with the imperious first rule in the face of uncertain environmental change. This is to solve the fundamental problem of existence. Human systems have utilized rule sets - institutions - that define exchange relationships and interdependencies between people, tools, and the environment. Institutional economists are often concerned with how existent provisioning and adaptability strategies are, and have come to be, culturally defined; how that cultural context shapes and/or limits alternative provisioning and adaptability strategies; and how institutions can be changed - itself a process of collective action - to solve the fundamental problem of existence [Neale 1987, 1179].

Provisioning and Adaptability Strategies

People utilize social groups as an organizational medium to develop and implement provisioning and adaptability strategies using codified forms of behavior to solve the fundamental problem of existence. Codified behavior defines how provisioning - the act of accessing throughput, transforming it into specific outputs, exchanging those outputs, and returning an equivalent mass of waste to the environment - is to be organized; establishes relationships among and between groups and their members; specifies provisioning tasks from inception to distribution; and defines relationships between social groups, economic activity, and the environment. We can envision many distinct and elaborate organizational efforts to solve the provisioning problem while simultaneously adapting to changing environmental conditions, from the Paleolithic era to the Great Capitalist Restoration of our time. Common to these strategies is the application of knowledge and tools to extract throughput and transform it into artifacts to reproduce culture.

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