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Rationality, Institutions, and Economic Methodology
Practitioners of any specific scientific discipline usually pay little attention to problems of methodology. They often have the attitude towards such problems that the distinguished biochemist L.J.Henderson once expressed thus: ?It is ordinarily far more useful to get to work on the phenomena and so acquire familiarity with things than to spend time talking about methodology or even to pay too much attention to the analysis of actual methods?. There is a considerable amount of pragmatic truth in this. General methodological discussions do not solve problems by themselves. It is one thing to lay bare problems and weaknesses within a discipline. It is quite a different thing to solve them, elaborate new approaches and then put them to work. This is usually done in connection with research on some specific problem and if the effort is successful it convinces the practitioners of the discipline of the power and usefulness of the new approach. Yet methodological discussions have a rightful place in ordinary scientific discourse within any discipline. In the first place, they may enhance the awareness of and track down underlying problems and, thus, prepare the ground for new scientific advance. Second, during its growth any discipline now and then gets stuck or becomes so differentiated that it is necessary to take a new look at the foundations in order to provide new foundations or provide new unity in the diversity. Whatever value these observations may have, it remains a fact that the discipline of economics during the last two decades has experienced developments that may motivate a confrontation between the discipline and theories of science and methodology. In the first place, the methodology of economics has become a new subbranch of the discipline. Second, problems concerning the role of institutions as well as of rationality have been widely discussed. The principle of rationality or of rational behaviour as well as the role of institutions are both of fundamental importance to economics, because the issue of rationality has a bearing upon the fundamental behavioural assumptions while the issue of institutions concerns the constraints and the outcome of choice. Even if the assumption of rationality certainly is no necessary precondition for the coherent working of an economy?it could be governed by habit, norms, fiat or whatever, if generally internalized by economic agents?it is a fact that rational behaviour looms large within economic theory both as prescriptive principle for individual behaviour and as a descriptive principle for individual-cum-collective behaviour. It is in this last respect that the principle of rationality becomes really interesting as testified already by Adam Smith in his famous dictum about the invisible hand mapping rational individual behaviour into rational collective outcomes. With Smith and other founders of political economy the principle of rationality essentially implied an assumption that individuals prefer more to less, although Senior formulated the maximization hypothesis in its prescriptive sense applied to individual behaviour. Only in the modern theory of a perfectly competitive equilibrium there is a marriage between individual maximization behaviour and collective optimality as expressed by the Pareto criterion, namely that every perfectly competitive equilibrium under certain assumptions achieves Pareto optimality. But this triumph of the rationality principle was won at a high price. The general perfectly competitive equilibrium is about economics rather than about economy, partly because of the necessary assumptions (no externalities or economies of scale and all individuals having the same utility function, etc.) and partly because it cannot really exist due to the insuperable costs of gaining information. This indicates that the rationality principle by itself is weak and needs some complementary principles in order to create rational individual-cumcollective behaviour. It is at this point that the issue of institutions comes to the fore. When Mandeville asserted that public benefits was the outcome of private vice and Smith likewise claimed that it is the butcher?s self-interest and not his benevolence that supplies us with (good) meat, they expressed the fundamental identity between individual and collective optimality and the importance of relying on self-interest in achieving collective optimality in large groups of anonymously interacting individuals. But this observation did not rule out the operation of socially imposed codes of conduct in large groups, partly because large groups are made up of smaller groups and partly because individuals in large groups (society, nation) consciously create norms and rules of behaviour and enforcement in the shape of laws, police, courts, educational and religious systems, cultural codes and philosophical principles as frameworks for individual choice. Already John Stuart Mill was convinced that the collective economic behaviour under the rule of private property was ?the result of two determining agencies competition and custom? and in his system of logic he was groping for ?one great case of intermixture of laws? for the explanation of social behaviour. This broader approach to economics was, of course, still more elaborated in Marx. The missing links for a general theory of economic behaviour were searched for in theories of group and class behaviour, of vertical relations between men, of interaction and conflict between individuals and groups, of organization and of historical change. Veblen put the problem neatly with respect to the institution of property: ?While the institution of property is included?among the postulates of the theory, and even is presumed to be everpresent in the economic situation, it is allowed to have no force in shaping economic conduct, which is conceived to run its course to its hedonistic outcome as if no such institutional factor intervened between the impulse and its realization?. But these early forerunners of modern institutional economics had little chance of success, as long as the full implications of the theory of supply and demand had not yet been investigated and spelled out. When this had been done and it became possible, as testified by the theory of general perfectly competitive equilibrium, to see what could be achieved as well as what was missing, time was mature for a broadening of the perspective. But neoinstitutional economics is still in its infancy and it is far too early to hope for a synthesis between general equilibrium theory and neo-institutional theory. Terms have to be clearly defined, theorems in delimited areas of investigation should be elaborated and relations between various entities must be established before consistent and meaningful general theories could be established. If neoinstitutional economics applies the method of isolation and goes into depth in selected areas of economic behaviour and if it succeeds in attracting the best brains of the profession, we could expect interesting new results in the decades ahead. If this volume, dealing with the methodological foundation of neoinstitutional economics is a step in this direction, it has served its purpose. In conclusion I want to thank all those who have contributed to this volume and, especially, Dr Uskali M?ki and Dr Christian Knudsen for their efforts to bring it out. The Bank of Sweden Tercentenary Foundation, which sponsors thematic studies at SCASSS, generously provided financial support for the project.
Ketersediaan
| Call Number | Location | Available |
|---|---|---|
| Tan 330 Usk R | PSB lt.dasar - Pascasarjana | 0 |
| Penerbit | London Routledge., 1993 |
|---|---|
| Edisi | - |
| Subjek | Buka di https://remote lib.ui.ac.id/menu |
| ISBN/ISSN | - |
| Klasifikasi | - |
| Deskripsi Fisik | - |
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| Other Version/Related | Tidak tersedia versi lain |
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