Evol. Inst. Econ. Rev. 2(1): 1–5 (2005)

INTRODUCTION

The Socio-economics of Institutions and Evolution
Makoto NISHIBE* and Hiroyasu UEMURA*** Graduate School of Economics, Hokkaido University, Kita 9 Nishi 7, Kita-ku, Sapporo
060–0809, Japan. E-mail: nishibe@econ.hokudai.ac.jp** International Graduate School of Social Sciences, Yokohama National University, 79–4
Tokiwadai, Hodogaya-ku, Yokohama 240–8501, Japan. E-mail: huemura@ynu.ac.jp

Evolutionary economics has two different identities — negative and positive —though we may find them interrelated when we study them more deeply. What objections
evolutionary economics has raised to orthodox Neo-classical economics determine its
negative identities. More specifically, they are formed as counterarguments against two
principles of Neo-classical economics: strong rationality of agency in the form ofmaximisation of any functions of utility or profit at the micro level, and the perfectcoordination of aggregate demand and supply in all markets or the compatibility ofstrategies of agents in the form of various types of equilibria at the macro level. In theNeo-classical ‘micro foundation of macro economics’ perspective, pre-determined
micro-level behaviors exclusively decide macro-level states. However, there are different
alternatives to these two principles and the micro-macro relation. Behaviors of the agent
with the various types of context-related/situated rationality or non-rational social
preferences, as well as non-equilibrium or process-oriented coordination in various
institutional contexts, can be considered from the viewpoint of evolutionary economics.
Micro-level factors affect macro-level states, but the latter also affect the former. This is
not a one-way but a two-way causal relation between micro and macro levels, whichmight be called the ‘micro-macro loop.’ In this regard, the opinions of the authors in thisspecial issue are not exactly the same, but they all take the view of a two-way causalrelation.
On the other hand, the positive identities of evolutionary economics are formed as
answers to the questions when we ask its originalities distinct not only from Neoclassical economics but also from other heterodox economics. There are threefundamental questions to tackle: what institutions mean, what evolution means, and how
JEL: B20,B52.

M. NISHIBE and H. UEMURA

we can understand the evolution of institutions and socio-economies. To answer thesequestions, we need to review the concepts of institutions and evolution and theirsignificance in light of not only economics or economic theory proper, but the history ofeconomics, methodology and such other social sciences as philosophy, political scienceand sociology. And we should re-examine the relationship between the interactions ofbehaviors, the complementary interdependence of various institutions, and the evolutionof institutional architectures in the collaboration with other evolutionary social sciences.
Tony Lawson, in his paper ‘The Nature of Institutional Economics’, raises concerns
about Hodgson & Mayhew’s view of the nature of the old institutionalism, and proposes
his alternative conception of an institution based on the ontological framework
developed in his books Economics and Reality (Routledge, 1997) and Reorienting
Economics (Routledge, 2003). According to Hodgson & Mayhew individuals are not
fixed, but are shaped by institutional and cultural situations via something referred to as‘reconstituative downward causation.’ And it is this feature, according to Hodgson &Mayhew, that distinguishes old institutionalism from new institutionalism associatedwith Neo-classicalism. Lawson criticizes their view because this feature is also acceptedin the other modern heterodox traditions, including post-Keynesian, Feminist, Marxianand even Austrian economists. In setting out his alternative assessment Lawson develops
several theses: 1) the heterodox traditions are to be distinguished from the mainstream
according to ontological commitments (and not according to substantive or policyclaims); specifically, unlike the mainstream the heterodox traditions all presuppose theontological conception of openness, structure, process, and internal-relationality; 2) the
separate heterodox traditions are distinguished from each other not on ontological,
substantive or policy grounds, but according to individual concerns or questions ofinterest, and they are best conceived as divisions of labour within economics. In
Lawson’s view, old institutionalism is best viewed as a project concerned with theanalysis of economic (especially evolutionary) change and stability. Though recognisingthat institutions have the capacity of ‘reconstituative downward causation’, Lawson
argues that what differentiates institutions from other social phenomena (most of whichcarry this potential) is that they (though always changing) are relatively enduring, and soare a major source of stability in social life. Lawson criticises the standard assessment inwhich Veblen defined an institution as “settled habits of thought common to thegenerality of men,” and offers a counter-interpretation in order to justify his definition ofan institution. He also shows that his alternative definition conforms to the one
embedded in the Veblenian Dichotomy, the idea that social life or culture is essentially– 2 –The Socio-economics of Institutions and Evolution

decomposable into two aspects: technology as the source of change and institutions as
the source of stability and continuity.
We can also see the new theoretical development of institutional and evolutionary
economics among researchers who were engaged in the analysis of the institutionalarrangements of post-war capitalism in both US and Europe in the 1980s and 90s. Above
all, Samuel Bowles and Herbert Gintis develop their theoretical analysis of reciprocity
and cooperative behavior on the basis of the micro-modelling in evolutionary socialscience. For example, Herbert Gintis published his advanced-level text book of gametheory, Game Theory Evolving: A Problem-Centered Introduction to Modeling Strategic
Interaction (Princeton University Press, 2000), and Samuel Bowles also published his
inspiring book, Microeconomics: Behavior, Institutions and Evolution, (PrincetonUniversity Press, 2004). In these recent books, we can see the highly theoreticaldevelopment of evolutionary social science with its deeper understanding of behavior
and institutions, especially based on such analytical techniques as evolutionary gametheory and agent-based models. In Europe, there is another remarkable development ofinstitutional analysis, especially that in the régulation theory. Many inspiring books on
institutions and evolution have been published in the research program. In particular,
Robert Boyer published a book, Une Théorie du Capitalisme Est-elle Possible? (OdileJacob, 2004), which analysed the diversity of capitalism and institutional change fromthe viewpoint of the régulation theory, empathising with ‘the macro-institutionalfoundations of micro behaviors’. In this context, “institutional complementarity” is oneof the most important research topics in the various kinds of comparative institutional
analysis in both Europe and Japan. In this special issue, we are fortunate to have two
original papers written by those authors.
Samuel Bowles and Herbert Gintis, in their paper ‘Can Self-interest Explain
Cooperation?’, introduce a theoretical discussion on conditions for cooperation. In
particular, they examine a number of models of cooperation by self-interested, or ‘selfregarding’ individuals, that is, kin-based altruism, reciprocal altruism, indirectreciprocity, positive assortation, and show why the confidence of economists andbiologists that these models can explain human cooperation is really misplaced. For
example, reciprocal altruism, which is sometimes expressed by repeated game theory,
does not provide a plausible account of cooperation in larger groups. Indirect reciprocity,with entirely self-regarding preferences, can support evolutionary stable cooperative
outcomes only with very stringent informational requirements. In the model of positiveassortation with its deliberate choices of association with others, it is sometime assumed,– 3 –M. NISHIBE and H. UEMURA

quite implausibly, that one could refuse to associate with another member of one’s groupat no cost to oneself. Therefore, the authors argue that many forms of cooperation can besustained not by self-interest, but by social preferences, including a concern for the wellbeing of others and a willingness to punish others who violate social norms even when
this is costly to oneself, and emphasise that both punishment of those who transgress
norms and the willingness to incur costs to associate preferentially with members of
one’s own group depend critically on ‘other-regarding preferences’.
Robert Boyer, in his paper ‘Coherence, Diversity and the Evolution of Capitalisms:
The Institutional Complementarity Hypothesis’, analyses the forces that make relatively
and transitorily coherent the institutional configuration of capitalism, based on the recent
development of the régulation theory. In particular, in response to the literature on thevariety of capitalism approach (VOC), the author investigates the relative explanatory
power of various hypotheses: institutional complementarity, institutional hierarchy, coevolution, compatibility and isomorphism. Complementarity is one of the main forcesthat stick institutional forms one with another and produce the significant varieties ofcapitalism. Nevertheless, the institutional complementarity hypothesis is not sufficient tobridge the gap between micro and macro analysis of institutions. The notions of
isomorphism and institutional hierarchy provide some cohesive factors between firms,organisational configuration and the overall institutional architecture. Uncertainty andthe existence of some slack in the coupling of various institutions are key features thatcall for the mixing of various methodologies to detect institutional complementarities.
Furthermore, both hybridization and endometabolism are driving forces in thetransformation of institutional configurations. Therefore, the author argues that together
with a comparative analysis of institutional change, the institutional complementarity
hypothesis opens a promising program that could help in understanding the diversities
and evolution of capitalisms.
Related to our interests of this special issue, we introduce two other interesting papers
submitted to our journal. Carlos M. Parra, in his paper ‘Rules and Knowledge’, adopts
Dopfer’s view of ‘economic evolution as a growth of knowledge process,’ and examines
the functionality of the concepts of rules and knowledge using an evolutionary neurophenomenological perspective coupled with Peician semiotics and Sen’s capabilities
approaches. He focuses on the inherent unpredictability of rule and knowledge creationin order to show the need for a methodological shift, and proposes a merger ofevolutionary economics and welfare approach in terms of human development andknowledge growth.
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Bernard Lietaer and Stefan Brunnhuber, in their paper ‘Economics as an EvolutionarySystem,’ explains that consciousness changes occur in a sequence of pre-modern,modern, and post-modern that are clearly identifiable by emotional/cognitive
characteristics, behavior patterns and interactions with nature and community, and thatevolution of economic systems and money as its key organizing institution is observed in
the same sequence. They thus insist on a two-way causal relation between an economic
system with money and human psychology and behavior, and show that the possibility ofthe emergence of such post-modern currencies as electronic, barter and complementary
currencies can affect the time horizon of investment and the behavioral pattern of people,
which will result in transforming ‘Homo Economicus’ into ‘Homo Universalis.’
These two papers challenge the conventional methodology of economics in order toestablish a new framework of human knowledge and psychology, and seek to present
practical/policy implications of evolutionary and institutional socio-economics, which
will clarify the positive identities of evolutionary economics.
We believe that all the contributions in this special issue are so fruitful and valuable asto make our understanding of institutions and evolution of socio-economies deeper andwider than ever before. But there still remain a number of such open questions as how
two-way causality between micro-level behaviors and macro-level dynamics in aparticular institutional context can be analysed in collaboration with cognitive andbehavioural sciences and how the factors that determine institutional change can beanalysed from the broader perspective of evolutionary social science. There may still bea long way to go before we can construct a fully-fledged theory of evolutionary andinstitutional socio-economics in line with what we proposed at the beginning. It is vitalfor evolutionary economics to continue to identify not only its negative but also its
positive aspects.

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