Institutional economics, collective action & change

Institutional economists have held that we do not know how institutions change. I speculate why collective action as an agent of institutional change has been ignored

I used to be surprised that institutional economists argue that they do not know how institutional change happens. Collective action is such a prominent driving force, how could the economists have missed this? I speculate that this must be due to the structure-agent dichotomy in social sciences. Social theorists across disciplines have struggled between choosing structures or agency as their basis of analysis. Those who choose structures (production relations, prices, etc.) effectively assume that all human action is determined by the structures. When this is combined with the notion of equilibrium, institutional change can be explained mainly by external changes.

Once agency is removed from the picture, collective action becomes almost irrelevant. In other words, collective action is effective only as a process that brings about equilibrium when there is structural change and thus has no explanatory power. Even in game theory where the notion of an agent is central, agency has little relevance. This is because each agent is supposed to exhaust all strategic possibilities at each point of time, choosing the best possible response each time. In effect, the agent can do something different only when there is a structural change. There are some variations to this theme, but they are by and large trivial.

Equilibrium is a useful schema to understand how certain things work but its indiscriminate extension to every phenomenon is unproductive. The absence of alternative ways to understand how things work in economics today has impoverished the discipline and its ability to comprehend a wide range of phenomena. In my view, dispensing with it as the sole lens is crucial to understanding the role of collective action. It is of course possible to think of collective action as an agent of structural change that in turn can affect equlibria in different spheres (e.g. collective action against liquor can bring about prohibition or increased tax that will change the supply curve of liquor).

We can take different forms of collective action as forces by themselves that seek to affect institutions – both formal and informal. I have looked at the role of five kinds of social movements in Tamil Nadu and how they brought about political and social change. These changes in turn have had profound consequences for the development of the state. It is also possible to speculate the implications current social movements in India may have for future developments. If we are prepared to start with collective action and social movements as agents of change, lot of insights can be brought into understanding institutional change that has happened in the past and how things will happen in the future.

About Vivek Srinivasan

I work with the Program on Liberation Technology at Stanford University. Before this, I worked with the Right to Food Campaign and other rights based campaigns in India. To learn more, click here.

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