|Peter Boettke|
The announcement of the forming of a new international scholarly association -- World Interdisciplinary Network for Institutional Research (WINIR) -- has been circulating --- Download WINIR.
Readers of CP should be particularly excited about this development. Coordination is the problem in economic analysis, and the entrepreneurial market process is the solution to that problem, but that solution is contingent upon the institutional setting. Property, prices and profit/loss represent a specific context of choice, outside of that context of choice and entrepreneurial altertness may be directed in ways that do not solve the coordination problem and thus do not lead to realizing the gains from social cooperation under the division of labor.
As I argue in Living Economics, the mainline tradition of economics worked with the self-interest postulate and derived the invisible-hand theorem by way of institutional analysis. The mainline of economics never strove for an institutionally antiseptic theory (as Samuelson did), but instead always was striving for (as Buchanan put it) a 'genuine institutional economics' that is a 'significant and an important part of fundamental economic theory.'
It is this integration of the institutional level of analysis with fundamental economic theory that also characterizes my book, Institutional Economics: Property, Competition, Policies, which I had the good fortunate to be invited to join as a co-author for the second edition by Wolfgang Kasper and Manfred Streit. It is also ultimately the reason why Paul Dragos Aligica and I wrote our book on the Ostroms and the Bloomington research program.
Economists and political economists too often take the institutional framework within which economic activity takes place as fixed and given, rather than as a subject of study. Treating institutions as exogenous works for many problems in economics, but for many others it actually leads to bedlam. As Buchanan put it: 'The economist should not be content with postulating models and then working within such models. His task includes the derivation of the institutional order itself from the set of elementary behavioral hypotheses with which he commences.'
Economics is about exchange and the institutions within which exchange takes place. This perspective was represented in the work of Adam Smith to Vernon Smith, and in-between by Hayek, Buchanan, Coase, North and Ostrom. It is what good economics is all about. As I said before, self-interest postulate is the elementary building block from which the invisible-hand theorem is derived via institutional analysis. Perhaps the clearest methodological/analytical statement of this mainline approach can be found in Robert Nozick's Anarchy, State and Utopia and in the section on invisible-hand explanations. The equilibrating tendencies of any social system are a consequence of the institutional filter through which self-interested action and interaction are directed. Economics as a discipline provides the most articulate statements about the mechanisms generated by alternative institutional arrangements, but the historical and empirical details of particular institutions are often found in disciplines such as law, politics, sociology, and of course history. WINIR promises to encourage this dialogue across the disciplines.
Please browse the website and consider joining this intellectual effort. And if so inclined, download the announcement and circulate widely to faculty and students who may be interested.
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