Institutional Economic Theory

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Institutional Economic Theory


Economics 451


University of Missouri
-
Kansas City

Theory of Institutional Adjustment

Principles of Institutional Adjustment

Technological Determinism


Instrumental Primacy


Instrumental Primacy is the principle that all change is predicated on the actual ability to do so. Actually being
able to change requires instrumental capability and is therefore primary; Adjustments to or enhancements of
the warranted stock of knowledge.


Institutional adjustment depends upon a psychology of perception of the objective circumstances of possible
achievement. The principle of Instrumental Primacy (technological determination) is the impetus to adjustment

and
may be read to mean that there must be an accurate perception of what can be done as opposed to what is now being
done.


Knowing/Doing



Recognized Interdependence


This principle asserts that adjustment is specified by the pattern of interconnectedness and interdependency of the
members affected by the change. Social change requires more than the ability to "run the machines." Social technology,
the arts of associated living, are required and must be "invented" and tried out.


Understanding the relationships of Institutions to each other


Understanding relationships of people to institutions


Understand relationships of people to people


Knowing/Doing/Valuing














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Principles of Institutional Adjustment
--

Continued



Minimal Dislocation


All adjustments must actually be capable of being integrated into the remainder of the
existing social fabric. This principle discloses the limits, in term of rate and degree, of
any adjustment.

The social fabric of any organization is finitely elastic at any point of
change implementation. The adjustment is more likely to be achieved we follow a path
with small increments of continuous change.

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If adjustments are deferred and build to a situation where change involves
significant dislocation there will be more resistance as vested interests
accumulate around the prevailing institutional structure. This situation is more
likely to create the condition of ceremonial encapsulation making adjustments
less likely and less susceptible to deliberative processes.



Must be capable of re
-
correlation with other institutions



Notice the principles are instrumental in character. This is because adjustment is a change in
the relationship or synchronization of ceremonial behaviors to instrumental ones.




While adjustment is an interaction of ceremonial and instrumental behavior, the causative
agent is instrumental while ceremonial behavior is the passive and sometimes resistive.




There is an enduring tension in these and successful adjustment of institutions works to
reduce this tension. A lack of adjustment increases this tension. To recognize and to
experiment with different ways of bringing about change requires consideration of the
means
-
ends
-
consequences continuum.




How close that perception is to the instrumental reality is a critical feature in the adjustment
process. This relates to the other processes.

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Means
-
End
-
Continuum



In addition to the three principles above there are two process involved in institutional
adjustment. The first is the relationship of Means
-
Ends
-
Consequences.




This process relates to the problem of selecting actions that will bring about the desired
change; including the axiom that choosing means
is

choosing ends. It is a hypothesis about
what to do, but without the knowledge to do it.



The means
-
ends continuum is deceptively simple, but may sometimes have complex
implications. Means are inseparable from ends because arrival at an end has consequences
for where we can go once we have “arrived.”




Selection of means involves choices. Selection processes are based not only on the
"immediate" consequences of a choice, but future ones too.




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Instrumental Primacy
--
Technological Change


How it develops


Genius theory


Climate theory


Cumulative evolution theory


Two big jumps as advances in technology and tools.


100


50K years ago, probably due to genetic changes allowing increased brain function
and speech, or both.


13K years ago due to sedentary life style, i.e., move from nomadic to sedentary life style.


Third may be going on now


from Quantum Electro Dynamics (QED) to Nanotechnology


What inhibits


traditional habits and ways of doing


What encourages


experimental /scientific habits


Scientific revolution of 1500
-
1700 proceeded the industrial revolution


Astronomy, mathematics, physics


Steam engine, iron, pottery, glass, concrete, etc.


Advances in chemistry and physics proceed industrial expansion in later 19
th

century


Steel, electricity, petroleum, radio waves


Advances in biology and physics have proceeded genetic and electronic advances


The Singularity


the integration of biology, chemistry, and physics

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Illustrations of impact of “traditional” or conservative vs experimental behavior



New Guinea tribes Chimbu’s and Daribi



Chimbu’s are experimental and receptive.



Daribi are “conservative” and unreceptive



Japanese Samari vs peasant gun totters


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Agriculture


Back to the Future


Third Agricultural Revolution


20
th

century



Fourth Agricultural Revolution


21
st

century


Based on Scientific and technological developments


Example
--
The singularity


merger of biology, chemistry & physics


Nano technology



Nano Robots


Artificial Intelligence combined with Nano Robots

»
Creation Machines

»
Therapeutic cloning



Economic and Social Implications and Consequences of these developments


Food production


Meat in “factories”


Machines make products with little traditional human labor


build a car


Health and Life expectancy


Incurable diseases


curable


Life expectancy expands as dramatically as during 20
th

century


For women in industrialized countries


US

»
1900 = 48

»
2000 = 79

»
2100 = ??


For men in industrialized countries


US

»
1900 = 46

»
2000 = 75

»
2100 = ??



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If we can adjust institutions to correlate with dramatically changed situation.


Consider the issue of employment/unemployment
-

in this changed situation


-
what happens to definition of employment


-

what adjustments to the labor market will be necessary



mandatory community service




recognized interdependence


-

how will this affect those coming into labor force



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