Sufficient Reason

Sufficient Reason: Volitional Pragmatism and the Meaning of Economic Institutions

Daniel W. Bromley
Copyright Date: 2006
Pages: 256
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  • Book Info
    Sufficient Reason
    Book Description:

    In the standard analysis of economic institutions--which include social conventions, the working rules of an economy, and entitlement regimes (property relations)--economists invoke the same theories they use when analyzing individual behavior. In this profoundly innovative book, Daniel Bromley challenges these theories, arguing instead for "volitional pragmatism" as a plausible way of thinking about the evolution of economic institutions. Economies are always in the process of becoming. Here is a theory of how they become.

    Bromley argues that standard economic accounts see institutions as mere constraints on otherwise autonomous individual action. Some approaches to institutional economics--particularly the "new" institutional economics--suggest that economic institutions emerge spontaneously from the voluntary interaction of economic agents as they go about pursuing their best advantage. He suggests that this approach misses the central fact that economic institutions are the explicit and intended result of authoritative agents--legislators, judges, administrative officers, heads of states, village leaders--who volitionally decide upon working rules and entitlement regimes whose very purpose is to induce behaviors (and hence plausible outcomes) that constitute the sufficient reasons for the institutional arrangements they create.

    Bromley's approach avoids the prescriptive consequentialism of contemporary economics and asks, instead, that we see these emergent and evolving institutions as the reasons for the individual and aggregate behavior their very adoption anticipates. These hoped-for outcomes comprise sufficient reasons for new laws, judicial decrees, and administrative rulings, which then become instrumental to the realization of desired individual behaviors and thus aggregate outcomes.

    eISBN: 978-1-4008-3263-7
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Front Matter
    (pp. i-iv)
  4. Acknowledgments
    (pp. vii-viii)
  5. Preface
    (pp. ix-xii)
  6. Prelude
    (pp. 1-2)

    It may be supposed that the most fundamental of human needs concerns food, water, and staying warm. This supposition would be mistaken. The most fundamental human need concerns what to believe. Believing is precedential to eating and drinking (and staying warm) for the simple reason that even the seemingly basic acts of eating and drinking require a concept about surviving and thereby experiencing the future. This attribution of value to the future is what renders survival a conceptual rather than a physical matter. Without theideaof the future, and without the attribution of value to the future, eating is...

  7. CHAPTER ONE Prospective Volition
    (pp. 3-19)

    At midnight on September 2, 1967, the Swedish government undertook a profound institutional change: it altered the side of the road on which automobiles were to be driven. We might suppose that Sunday, September 3 was a day of some considerable adjustment for drivers in Sweden, and it seems probable that the following months were interesting times on Sweden’s roads. Why would the government of Sweden undertake such a disruptive institutional change? Why does it matter on which side of the road a people drive, as long as they all do it on the same side? How much did it...

  8. CHAPTER TWO The Task at Hand
    (pp. 20-28)

    My main purpose here is to offer an epistemological vision and approach—a theory of action—that stands in stark contrast to the ubiquitous prescriptive urge that necessarily flows from commitments to what Richard Bernstein refers to as objectivism, rationality, and realism. Standing opposed to these modernist certitudes we find the derogatory ideas of relativism, irrationality, and antirealism. There can be little doubt that the first trilogy (objectivism, rationality, realism) is privileged in the modern mind, whereas the latter (relativism, irrationality, antirealism) is regarded as encompassing all that is distasteful and ambiguous about postmodern thought and practice. Indeed, the terms...

  9. Part One: On Economic Institutions

    • CHAPTER THREE Understanding Institutions
      (pp. 31-42)

      Institutions are the rules whereby going concerns—families, clans, villages, firms, nation-states—regularize and channel individual action and interaction. Institutions define and specify opportunity sets, or fields of action, for the members of a going concern. Put somewhat differently, institutions are the means whereby the collective control of individual action is given effect. The study of institutions brings us into direct contact with the socially constructed norms, working rules, and entitlements that shape and influence individual fields of action. The tradition in economics has been to explain behavior in terms of prices, preferences, and the maximization of utility. However, utility...

    • CHAPTER FOUR The Content of Institutions
      (pp. 43-66)

      In the previous chapter I developed the idea that economic institutions are the product of law-giving and law-judging entities—legislatures or parliaments and the courts. With this idea in mind we can see that, at any moment, one must regard an economy as a set of structured relations. That is, when considering any economy we must immediately bring into view the institutions that define, structure, and give meaning to that economy. These institutions include, but are not limited to, the structure of property rights, contract and bankruptcy law, the law of credit, general business law, the law of marriage and...

    • CHAPTER FIVE Institutional Change
      (pp. 67-84)

      Prevailing accounts of institutions and institutional change are predicated on an epistemology of positivism and consequentialist welfarism. Indeed, the “new” institutional economics differentiates itself from the classical institutional economics of Commons and Veblen in the belief that it now brings to the task a level of theoretical exactitude and empirical truth that eluded the classical institutionalists. The new institutional economists start from the presumption that economics isthescience of choice. They are committed to the doctrine of methodological individualism. They tend to see institutions as constraints on the otherwise efficient working of free exchange among atomistic utility-maximizing individuals. And...

  10. Part Two: Volitional Pragmatism

    • CHAPTER SIX Fixing Belief
      (pp. 87-102)

      The standard approach to economics is embedded in the hypotheticodeductive method. On this approach, primitive axioms (covering laws) inform the search for particular assumptions and applicability postulates that will then suggest hypotheses to be tested against data from the “real” world. The axioms entail postulates of rationality, self-interest, stable preferences, and the alleged desire to maximize utility. In such exercises, the truth content of the axioms is not in dispute. Indeed, the core axioms of economic theory are rarely subjected to tests of their veracity. This is the essence of foundationalism. Although received theory may be tested on occasion, it...

    • CHAPTER SEVEN Explaining
      (pp. 103-114)

      If one believes, as many economists do, that the essential purpose of economics is to offer predictions, one must acknowledge that explanation, being essential to prediction, is central to the practice of economics. Moreover, if one believes that the essential purpose of economics is to offer useful and valuable advice for solving particular social problems, one must acknowledge that explanation, being essential to prescription, is central to the practice of economics. In short, it is impossible to predict economic outcomes—and it is impossible to offer coherent prescriptions for perceived economic problems—without first developing plausible explanations of past, present,...

    • CHAPTER EIGHT Prescribing and Predicting
      (pp. 115-128)

      Pragmatism suggests that economics must concern itself with explaining the reasons for observed action (phenomena) rather than with finding theoretical justifications for those phenomena. Once explanation is on sound footing, prescribing and predicting logically follow. If we know why certain results exist (or fail to exist), then we can plausibly prescribe what is needed to alter those observed phenomena should they be found to be undesirable. Or, we can plausibly prescribe what steps might be sufficient to induce different outcomes. Prescription therefore constitutes prediction about future states. Pragmatism also suggests that the central issue in prescription (and therefore explanation) is...

    • CHAPTER NINE Volitional Pragmatism
      (pp. 129-152)

      We are now ready to consider the general outlines of a pragmatic theory of collective action. This theory will stand in contrast to the tendentious and normative approach that now dominates much of the policy dialogue in economics. The existing commitment to prescriptive consequentialism constitutes the tenuous basis for truth claims (assertions) regarding definitions of the good, the socially preferred, and therefore the best thing to do. When public decision makers find reasons to ignore these prescriptive assertions, they are very often denounced for taking actions that are inefficient, politically motivated, irrational, or not in the public interest.

      We see...

  11. Part Three: Volitional Pragmatism at Work

    • CHAPTER TEN Thinking as a Pragmatist
      (pp. 155-165)

      Volitional pragmatism is concerned with the explanation of individual and collective action and with economic outcomes. In that sense, volitional pragmatism concerns the asking for and giving of reasons. To illustrate what it means to think as a pragmatist and to consider public policy from the perspective of volitional pragmatism, I explore here, in a very general way, a selection of issues.

      As we know, laws governing smoking in public places have undergone a fairly pronounced change over a rather short period of time. Of course, many laws change frequently, but the speed with which institutional arrangements governing such widespread...

    • CHAPTER ELEVEN Volitional Pragmatism and Explanation
      (pp. 166-179)

      A major theme here concerns how it is that economists come to “know” what we think we know about particular events or outcomes. Paul Romer captures, to a large extent, how many economists contend with the difficult matter of explanation. Ordinarily a deductive model is constructed based upon the axioms of economics, some plausible assumptions, and a few applicability postulates. The structure of this analytical engine is inevitably driven by what data the economist believes to be available from secondary sources. Notice that the choice of data, to a large extent, preordains the structure of the model (the analytical engine)...

    • CHAPTER TWELVE Volitional Pragmatism and the Evolution of Institutions
      (pp. 180-198)

      I have suggested that we will be unable to gain clarity on the content and meaning of economic institutions without first accepting the idea that the subject matter of economics is properly understood as the study of how societies organize themselves for their provisioning. At the moment, much of economics is taught as if the subject concerned mere economizing behavior from within a set of institutional “constraints.” Even the new institutional economists regard institutions as “constraints” (North 1990). The new institutional economics also seeks to make institutional change endogenous and thus mechanically driven by the same price-theoretic algorithms that are...

    • CHAPTER THIRTEEN Volitional Pragmatism and the Economic Regulations
      (pp. 199-211)

      A frequent organizing principle in economics is that there is something identifiable and separate calledthe economy. Coincident with this perception is the related idea that there is something else calledpolitics. That these demarcations happen to mirror the disciplinary turf of modern universities is not unrelated to this demarcationist vision of the modern democratic nation-state. Of course, at one time economics and political theory were united both mentally and structurally in the academy. But the advent of economics becoming both “analytical” and method-driven gave rise to the felt need to differentiate the “science” of economics from the mere “art”...

    • CHAPTER FOURTEEN Sufficient Reason
      (pp. 212-224)

      My purpose here is to develop the broad outlines of a theory of economic institutions and of institutional change. I seek to offer an account, a description, of how individuals and groups arrive at decisions about the nature and structure of those working rules and property relations that will restrain, liberate, and expand their range of volitional choice and action. This account consists of concepts, relations, and entailments that together constitute a theory of choice and action with respect to economic institutions. The approach offered here will allow us to determine if indeed there is a particular logic to a...

  12. Bibliography
    (pp. 225-234)
  13. Index
    (pp. 235-244)