Institutional marketplaces

When you think of institutions, you don’t think of the definition of the word as much as examples: marriage, the family, the justice system, or the education system. These are commonly recognized as they exist across all societies. Even criminals have their own justice system. Institutions are loosely defined as the formal and informal rules that organize social, political, and economic relations. But if one wanted to use institutions as a defining element of economic activity, it is worth teasing out a few of their components.

If there are rules, it is implied that there is a group of people who both agree to the rules and maintain them. It is also logical that the rules are put in place to maintain or protect a shared value, a common interest. So, in talking about institutions, it only makes sense to state which group is attached to the rules and what exactly is their objective. Furthermore, if the group must take action to support or defend the rules, then we will call this work.

Consider the institution of marriage. The joining of two people by a vow of devotion to one another varies considerably across society. The impact of this variance can help delineate subgroups of institutional marriage groups. For instance, the swingers who find the swapping of partners at a poolside party are probably not spending a lot of time with couples at Good Shepard Lutheran Church in many a midwestern town. Which is a way of saying that the institution-M for the party people, sub-S, has a different social contract and obligation for W work, then the M sub-C who sing hymns on Sunday morning.

I don’t think anyone would challenge the claim that these two groups live and work on their marriage in different realms. But what can we call these special places where rules are created and enforced, where groups of people meet to work in the effort of securing a value for their social commitments? The word institution has too broad a reach and leaves out the notion of an ongoing exchange.

I like the visual of a platter. All the swingers are out there tipping on a platter, mixing with new members of their loosely held marital vows. While the church people recognize marriage time and again at weddings and baptisms and anniversary potlucks in the church basement. If there is a loss of life, people deliver casseroles. If there are signs of discord, the kids get invited out so the parents can work on the issues of discontent. The contract isn’t only to one another but in support of the institution.

These eco-socio-platters are the marketplaces for institutions. Failing to define them can lead to uncomfortable misunderstandings. According to my new book club book, Are Economists Basically Immoral? (Heyne) Laurence Summers got himself into a bruhaha by mixing platters.

Lawrence Summers, the chief economist of the World Bank, got him. self in serious trouble last December when he sent a memo to some bank colleagues arguing that polluting activities ought to be shifted from developed to less developed countries. He argued that the demand for a clean environment has a very high-income elasticity: which means that people become keener on it as their incomes rise. He said that wealthier people are ordinarily willing to sacrifice more for aesthetically pleasing environments than are poor people. Moreover–and I suspect this is what really got him into trouble- he claimed that the health effects of pollution are less in a poor country than in a rich country because the forgone earnings of people whose health is adversely affected by pollution are so much lower in poor countries, because of both lower incomes and shorter life expectancies. Someone leaked that memorandum to an environmental group and a hail of criticism descended on the World Bank and Lawrence Summers. Summers protested that his statements were designed as a sardonic counterpoint, an effort to sharpen the analysis.”

Making comparisons across vastly different eco-socio-platters will more likely make you look bad than good. By taking a stark look at the economic circumstances of poor people and propping their platter up next to where the rich people live, the audience could only feel outraged. Not because the observations were wrong but because they are empathetic to the plight of the poor more than the truth. Being so bluntly presented with the fact that people of meager circumstances have different life outcomes invokes a sense that all is not right in the world. In the public or institutional realm, this is the fuel that ignites action.

It’s not helpful, however, to have false comparison made which instigate action. And that is the fundamental reason why we need to define our platter. Swingers and Lutherans don’t mix.

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