Abstract
The present study examines Masahiko Aoki’s continual attempts to conceptualize institutions, with main focus on Aoki (Toward a comparative institutional analysis. MIT Press, Cambridge, 2001; J Econ Behav Organ, 79:20–34, 2011). The unique aspect of his approach is identified as his efforts to grasp the dynamic and collective-cognitive nature of institutions. Highly valuing this uniqueness, I identified several difficulties in this approach. In this study, I argue that the profound nature of institutions is beyond the formal description of game theory, which Aoki maintained in his lifetime. I also argue that the Hegelian perspective submitted by Herrmann-Pillath and Boldyrev (Hegel, institutions and economics: performing the social. Routledge, London, 2014) suggests a possible future direction of the research on institutions in economics, albeit not necessarily one amenable to mathematical formulation.
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Notes
The reason that game theory is helpful for understanding institutional phenomena is that the formal definition of games has a strong expressive power—it allows us to model fine details of asymmetric information, give predictions of the observed regularity of behavior, and understand the role of belief in sustaining the equilibrium behavior.
Hodgson (2015) correctly points out that the task of defining institutions is conceptually different from the task of understanding or analyzing them. Searle (2015) warns us that we must be careful when we ask questions of the form “what is…?” With these precautions in mind, I take up this subject matter, because I believe that how we conceptualize institutions is important, as it directs our research, by defining what kind of phenomena we regard as important and want to understand.
“Internalism” here refers to a stance in the philosophy of mind that regards actions as external phenomena to be explained by resorting to internal determinants, such as preferences and beliefs, whereas “externalism” grasps the workings of a mind more broadly, and thus emphasizes the interaction between brain, body, and external environments.
Aoki recommended both of these books for Japanese translation and they were translated and published in Japanese.
Lewis’s definition of proper equilibrium is the same as what we usually call “strict equilibrium”; he calls a strategy combination “a proper equilibrium if each agent likes it better than any other combination he could have reached, given the others’ choices” (Lewis 1969, p. 22).
A meet is the finest common coarsening of agents’ information partitions.
Aoki’s stance towards rigorous formulation is somewhat ambivalent. On the one hand, he writes “I rely mainly on game-theoretic language and frame of thought with liberal re-interpretations” (Aoki 2011, p. 21). On the other hand, mentions his conception of institutions “using rigorous set-theoretic notions” (Aoki 2015, p. 486).
To quote, “[o]ne of the basic ideas in the book was that the essence of psychological process and knowledge as its outcome lies in the ‘classifications’ of perceived physical events in one way or another through the network of neurons. The formalization of the idea of classification is precisely at the basis of the notion of common knowledge in the contemporary theory of knowledge” (Aoki 2011, p. 24).
Intentionality is a technical term in philosophy that denotes “aboutness” or “directedness” of the mind and/or linguistic expressions. For example, we cannot believe something without any object to be believed. Those states of mind are called “intentional states.” “Collective intentionality” means that we have common intentionality.
In footnote 14 of their paper, they write “the reducibility of collective to individual intentions is a thorny issue in the philosophy of action.” However, they proceed by saying “it is perfectly possible to discuss the relation between the rules-in-equilibrium and constitutive rules approach while remaining neutral on this matter” (Hindriks and Guala 2015, p. 471).
Recall North’s definition of institutions: “In the jargon of the economist, institutions define and limit the set of choices of individuals” (North 1990, p. 4).
Sugden (2015) does not appreciate Hindriks and Guala’s or Aoki’s efforts to incorporate representation in the conception of institutions, contending that the regularities of behavior and affective response explained by evolutionary game theory are sufficient as a scientific explanation of conventions.
To quote, “Just as instinct is older than custom and tradition, so then are the latter older than reason: custom and tradition stand between instinct and reason” (Hayek 1991, p. 23).
In the expressivist view, actions are primary facts and therefore cannot be ontologically separated from their causes/intentions. Rather, actors are engaged in reflective activities, always discovering their own intentions related to their action.
Herrmann-Pillath and Boldyrev (2014, Ch. 3) attempt at applying their approach to a reconsideration of money, given new historical evidence that money did not emerge to save transaction cost in a barter economy.
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The author is grateful to Carsten Herrmann-Pillath for invaluable discussions on Professor Aoki’s approach to institutions. Thanks also go to the attendees of the session commemorating Masahiko Aoki at the Annual Meeting of Japan Association for Evolutionary Economics, March 26–27, 2016, Tokyo. This study was supported by JSPS Kakenhi Grant Number 16K03557 and the MEXT-Supported Program for the Strategic Research Foundation at Private Universities 2013–2017.
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Takizawa, H. Masahiko Aoki’s conception of institutions. Evolut Inst Econ Rev 14, 523–540 (2017). https://doi.org/10.1007/s40844-017-0087-0
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DOI: https://doi.org/10.1007/s40844-017-0087-0