On Institutional Rationality

By Redmond, William H. | Journal of Economic Issues, March 2004 | Go to article overview

On Institutional Rationality


Redmond, William H., Journal of Economic Issues


This paper develops a concept of rationality which is consistent with the institutional approach to human behavior. To many the term rationality has come to be associated with one particular thesis of mental operation, namely the maximizing neoclassical model, also known as rational choice theory. In fact, rationality is a considerably broader topic. Many alternate theories of rationality exist and have been well developed and well accepted in their respective literatures. Even the maximizing model of rationality comes in variants, including the descriptive/predictive variant favored by orthodox economists and the normative variant favored by many sociologists and political scientists (Levi, Cook, O'Brien, and Faye 1990). Differences in basic models of rationality, as well as variants thereof, reflect and embody each field's assumptions and investigative objectives.

In the most general terms, rationality is descriptive of mental processes which consciously strive to master reality (Kalberg 1980; Swedberg 1998; Huber 1977). It is what makes for human agency in human affairs, as opposed to other possibilities such as divine intervention. While better known as a proponent of instincts, Thorstein Veblen also treated rationality, and his own notion of rationality included an inhibitory (self-controlling) mode in addition to an "activistic" (proactive) mode (Kilpinen 1999). In institutional thought, human relations and institutions play a prominent part in reality. Consequently an institutional conceptualization of rationality should comfortably handle behaviors such as habit and routine, emulation, institutional stability, and so forth.

The Nature of the Institutional Mind

In order to advance any notion of rationality, one must proceed from some basic assumptions about the human mind. Two such are outlined here for purposes of contrast.

Metaphysical Mind versus Organic Mind

Systems of rationality are founded upon particular sets of assumptions which detail key features of the operation of the human mind. These sets of assumptions spring from quite different intellectual traditions, thereby producing distinctive differences in the resulting models. Tracing backward through rime one sees the sources of assumptions, often implicit in the current versions, which constitute core elements of rationality models.

The neoclassical model for example is the product of an extended developmental history--essentially a process of cumulative causation. The neoclassical model of the human mind derives from the classical model, which derives from that of eighteenth century philosophers, which, in turn, was based upon foundations laid out by Rene Descartes (Bush 1993). Cogito, ergo sure. (1) The individual thinker is the starting point of philosophy, and introspection forms the foundation of what is knowable. This thinking mind was held to be endowed by its Creator with unique properties and special powers, literally a case of pure reason. Indeed this mind was held to be so different in kind and character from the ordinary physical world that the mechanisms of its connection to the corporal body raised difficult conceptual issues. This was the famous philosophical problem of mind-body dualism, or what Clarence Ayres referred to as metaphysical dualism ([1944] 1962).

It is from this distant intellectual tradition that the neoclassical model of rationality emerged (Bush 1993). Despite having passed through many hands, the neoclassical model maintains continuity with the Cartesian in two essential respects: the dominating centrality of the individual and the supra-natural power of human cognition.

Evolutionary theory is a separate and distinct intellectual tradition, and one would naturally expect a considerably different view of the human mind. Among other differences, evolutionary theory is based on observation rather than introspection. Darwinism has had an effect on the social sciences as well as the biological, but its impact on the former has been both less dramatic and more uneven. …

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