Institution

Institutions are organizations, or mechanisms of social structure, governing the behavior of two or more individuals. Institutions are identified with a social purpose and permanence, transcending individual human lives and intentions, and with the making and enforcing of rules governing human behavior. As structures and mechanisms of social order among humans, institutions are one of the principal objects of study in the social sciences, including sociology, political science and economics. Institutions are a central concern for law, the formal regime for political rule-making and enforcement.

Historically, a distinction between eras or periods, implies a major and fundamental change in the system of institutions governing a society. Political and military events are judged to be of historical significance to the extent that they are associated with changes in institutions. In European history, particular significance is attached to the long transition from the feudal institutions of the Middle Ages to the modern institutions, which govern contemporary life.

Although individual, formal organizations, commonly identified as "institutions," may be deliberately and intentionally created by people, the development and functioning of institutions in society in general may be regarded as an instance of emergence; that is, institutions arise, develop and function in a pattern of social self-organization, which goes beyond the conscious intentions of the individual humans involved.

As mechanisms of social cooperation, institutions are manifest in both objectively real, formal organizations, such as the U.S. Congress, the Roman Catholic Church or the Bank of England, and, also, in informal social order and organization, reflecting human psychology, culture, habits and customs. Most important institutions, considered abstractly, have both objective and subjective aspects: examples include money and marriage. The institution of money encompasses many formal organizations, including banks and government treasury departments and stock exchanges, which may be termed, "institutions," as well as subjective experiences, which guide people in their pursuit of personal economic well-being and wealth. Powerful institutions are able to imbue a paper currency with certain value, and to induce millions into cooperative production and trade in pursuit of economic ends abstractly denominated in that currency's units. The subjective experience of money is so pervasive and persuasive that economists talk of the "money illusion" and try to disabuse their students of it, in preparation for learning economic analysis.

Marriage and family, as a set of institutions, encompass formal and informal, objective and subjective aspects. Both governments and religious institutions make and enforce rules and laws regarding marriage and family, create and regulate various concepts of how people relate to one another, and what their rights, obligations and duties may be as a consequence. Culture and custom permeate marriage and family. In the United States and western Europe, a transition from a conception of marriage, as license for sexual intercourse granted by Church and State, to a conception of marriage as a form of contract, freely entered into, has occasioned momentous social and political controversies regarding laws and customs governing the freedom of women, divorce, cohabitation outside marriage, contraception, and homosexuality.

Economics studies institutions from two perspectives. Firstly, how do institutions survive and evolve? In this perspective, institutions arise from Nash equilibria of games. For example, whenever people pass each other in a corridor or thoroughfare, there is a need for customs, which avoid collisions. Such a custom might call for each party to keep to their own right (or left -- such a choice is arbitrary, it is only necessary that the choice be uniform and consistent). Such customs may be supposed to be the origin of rules, such as the rule, adopted in many countries, which requires driving automobiles on the right side of the road.

Secondly, how do institutions affect behaviour? In this perspective, the focus is on behaviour arising from a given set of institutional rules. In these models, institutions determine the rules (i.e. strategy sets and utility functions) of games, rather than arise as equilibria out of games. For example, the Cournot duopoly model is based on an institution involving an auctioneer who sells all goods at the market-clearing price. While it is always possible to analyse behaviour with the institutions-as-equilibria approach instead, it is much more complicated.

Public choice theory, a branch of economics with a close relationship to political science, considers how government policy choices are made, and seeks to determine what the policy outcomes are likely to be, given a particular political decision-making process and context.

Sociology traditionally analyzed social institutions in terms of interlocking social roles and expectations. Social institutions created and were composed of groups of roles, or expected behaviors. The social function of the institution was served by the fulfillment of roles. Basic biological requirements, for reproduction and care of the young, are served by the institutions of marriage and family, by creating, elaborating and prescribing the behaviors expected for husband/father, wife/mother, child, etc.

While institutions tend to appear to people in society as part of the natural, unchanging landscape of their lives, study of institutions by the social sciences tends to reveal the nature of institutions as social constructions, artifacts of a particular time, culture and society, produced by human choice, though not directly by individual intention. The relationship of institutions to human nature is a foundational question for the social sciences. Institutions can be seen as "naturally" arising from, and conforming to, human nature -- a fundamentally conservative view -- or institutions can be seen as artificial, almost accidental, and in need of architectural redesign, informed by expert social analysis, to better serve human needs -- a fundamentally progressive view. Adam Smith anchored his economics in the supposed human "propensity to truck, barter and exchange". Modern feminists have criticized traditional marriage and other institutions as elements of an oppressive and obsolete patriarchy.

See also

• Category:Institutions
• nation, country state.
• effect on individuals institutionalisation
• institutional economics
• establishment
• Institute

External links

• Avner Greif, Institutions: Theory and History (http://www-econ.stanford.edu/faculty/Greif_Instutions/GreifBook.html), Cambridge University Press, forthcoming.
• International Society for New Institutional Economics (http://www.isnie.org)

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