Neil Komesar on Institutional Economics (IE)
Neil Komesar wrote a piece in the book, "Alternative Institutional Structures" that was edited in honor of Al Schmid's retirement entitled "The Essence of Economics". In that piece, Komesar takes on the approach used by Schmid and north regarding their approach to IE.
Komesar believes that Schmid and other economists use the law in a fixed sense as a driver of economic performance. He does note the difference in performance perspective with Schmid focused on distribution and North, as an example, focused on allocative efficiency. Komesar believes that this is not a fruitful approach and that law moves around and should be endogenous versus exogenous.
The Komesar approach is based on the idea that the number of participants is the driving force in his approach to IE. A large number of participants increases the transactions and the difficulty of securing cooperative action. Komesar borrows the two force model from political science to engage in his comparative analysis. He is very focused on a comparative institutional analysis and these comparative options in his model are: judicial, political and market based. Each one of these institutional options has advantages and disadvantages based on this underlying dynamics.
Using this approach, Komesar challenges thinkers like Schmid who he believes use an institution as rules and laws approach to adopt his institution as decision making approach. He focuses in this piece primarily based on his analysis that economists like North, Schmid and Hayek use law as a fixed and written instrument that the participants will simply obey in a fairly routine and predictable manner. He states for example that the argument that a "minimal state" simply begs a whole series of questions that remain unanswered.
Komesar's approach is that the number and type of participants is the key variable that drives the effectiveness of the comparative institutional approaches. As he writes, "the most important institutions are not laws, rules and customs, but rather the decision-making processes that define and react to these.....laws, rules and customs take on most of their meaning from the behavior of these decision making institutions" (Komesar, pg. 184 in Mercuro and Batie, 2009).
Does Komesar's critique directly impact our thinking about the Great Lakes approach to IE? I think Schmid perhaps has not delved as deeply as he could have into the the specific nature of institutions. At the same time, Al wrote and thought about the interaction of behavioral models, beyond rational choice, and their interaction with institutional structures. Al was trying to understand how institutions and the nature of goods generated economic performance. Komesar was bring to understand which institutions would likely prevail under varying conditions related to the type and number of participants. They are doing different things and we can learn from each one.
Komesar believes that Schmid and other economists use the law in a fixed sense as a driver of economic performance. He does note the difference in performance perspective with Schmid focused on distribution and North, as an example, focused on allocative efficiency. Komesar believes that this is not a fruitful approach and that law moves around and should be endogenous versus exogenous.
The Komesar approach is based on the idea that the number of participants is the driving force in his approach to IE. A large number of participants increases the transactions and the difficulty of securing cooperative action. Komesar borrows the two force model from political science to engage in his comparative analysis. He is very focused on a comparative institutional analysis and these comparative options in his model are: judicial, political and market based. Each one of these institutional options has advantages and disadvantages based on this underlying dynamics.
Using this approach, Komesar challenges thinkers like Schmid who he believes use an institution as rules and laws approach to adopt his institution as decision making approach. He focuses in this piece primarily based on his analysis that economists like North, Schmid and Hayek use law as a fixed and written instrument that the participants will simply obey in a fairly routine and predictable manner. He states for example that the argument that a "minimal state" simply begs a whole series of questions that remain unanswered.
Komesar's approach is that the number and type of participants is the key variable that drives the effectiveness of the comparative institutional approaches. As he writes, "the most important institutions are not laws, rules and customs, but rather the decision-making processes that define and react to these.....laws, rules and customs take on most of their meaning from the behavior of these decision making institutions" (Komesar, pg. 184 in Mercuro and Batie, 2009).
Does Komesar's critique directly impact our thinking about the Great Lakes approach to IE? I think Schmid perhaps has not delved as deeply as he could have into the the specific nature of institutions. At the same time, Al wrote and thought about the interaction of behavioral models, beyond rational choice, and their interaction with institutional structures. Al was trying to understand how institutions and the nature of goods generated economic performance. Komesar was bring to understand which institutions would likely prevail under varying conditions related to the type and number of participants. They are doing different things and we can learn from each one.
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