Institutions as Game Theory Outcomes: Towards a Cognitive-Experimental Inquiry (original) (raw)
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This paper introduces the notion of ‘cognitive’ institution and discusses its relevance to institutional economics. Cognitive institutions are conceptually founded on the philosophy of mind notion of extended mind, broadened to also include the distinctly social, institutional, and normative dimensions. Cognitive institutions are defined as institutions that not just allow agents to perform certain cognitive processes in the social domain but, more importantly, without which some of the agents' cognitive processes would not exist or even be possible. The externalist point of view of the extended mind has already had some influence in institutional economics: Arthur Denzau and Douglass North first introduced the notion of institution understood in terms of ‘shared mental models’, and relatedly philosopher Andy Clark introduced the notion of ‘scaffolding institution’. We discuss shared mental models and scaffolding institutions and go a step further by showing that the notion of c...
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This short paper begins with a summary of the views of a sympathetic game theorist on the current state of play in what is still called the New Institutional Economics. It continues with a much abbreviated summary of my own attempts to treat justice as a kind of institution in the hope that this will serve as a case study in how game theory can serve as a useful intellectual framework for the study of human institutions.
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This short paper begins with a summary of the views of a sympathetic game theorist on the current state of play in what is still called the New Institutional Economics. It continues with a much abbreviated summary of my own attempts to treat justice as a kind of institution in the hope that this will serve as a case study in how game theory can serve as a useful intellectual framework for the study of human institutions.
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Having pioneered the concept in economics that institutions structure incentives, Douglass North's later work posed the question, in turn: what structures institutions? His approach explored the role of culture, norms, and ideas and eventually drew its focus on shared mental models as the basis of institutions. An ongoing literature takes up North's fundamental question. In this paper, we contribute to this literature by bringing together North's mental-models approach and the work of philosopher John Searle. Searle pioneered the concept in philosophy that institutions are constitutive rules, established through collective assignment of particular status to objects in the world. Drawing upon cognitive science research on knowledge, learning, and habituation, as well as computer science research on artificial intelligence, we develop Searle's framework to pose a simple yet general account of the cognitive origins of institutions and the implications of this link for social theory. Our framework reconciles the social science approach to institutions as regulative rules with the philosophy approach to institutions as constitutive rules. It also provides a basis for considering impediments to social interaction that arise when individuals possess conflicting normative ideas and affiliate into groups whose shared understandings appear to conflict. Acknowledgments: This paper has been prepared for an edited volume celebrating the contributions of Douglass North. We thank the editor, Andrés Marroquín, and the publisher, Universidad Francisco Marroquín, for the opportunity to contribute to this volume. Sections of this paper are based on our joint ongoing work, including López and Caton (2018) and Caton and López (2018). The usual caveat applies.
Institutions and Formal Theory: What Do We Learn From a Game- Theoretic Definition of Institutions
Since the advent of formal economics in the late 19th century there has been a latent trade-off between formal and institutional economics. A quarter century ago, Douglass North bridged some of the divide between the two strands. However to grasp the full strength of formal modelling for institutional analysis and institutional design his task has to be completed by stating the definition for institutions in terms of formal game theory. Starting from classical examples, this article defines institutions as sets of stable Nash equilibria arising from humanly devised additional elements in the game structure of human interaction. The article is organized into a brief overview of the relationship between formal and institutional economics, the derivation and a short discussion of the definition, and examples illustrating the productivity of the approach. the students in the respective courses for their feedback and suggestions.
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This article defends a methodological and theoretical claim according to which the combination of epistemic game theory with the recent developments in the so-called “theory of mind” is able to provide an empirically grounded and theoretically consistent perspective on the mechanisms through which institutions determine the individuals’ beliefs and choices. This move toward an empirical social ontology is captured through what we call the Schelling-Bacharach principle in game theory. According to it, game-theoretic analysis of coordination and cooperation should study how the players are actually reasoning in different game situations.
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This theme paper focuses on political institutions and their effects on social choice. Institutions are argued to play a mediating role between the preferences of individuals and social choices. In addition to playing an endogenous role in molding and channeling preferences, institutions prescribe and constrain the set of choosing agents, the manner in which their preferences may be revealed, the alternatives over which preferences are expressed, the order in which such expressions occur, and generally the way in which business is conducted. The paper surveys the relationship between institutional arrangements and equilibrium outcomes in order to assess the importance of institutions for final outcomes. In so doing, we will have some perspective on the degree to which the traditional multidimensional voting model-institution-free and highly atomistic-is an extreme case. Since institutions are not carved in granite, and are themselves the object of choices, it is important to take the next step of determining the durability of institutional arrangements or, on the other hand, the ways they adapt and evolve or atrophy. This will be the subject of the later part of this paper.