Available Online: http://www.ejpau.media.pl/volume11/issue4/art-15.html
SPACE OF INDIVIDUAL BEHAVIORS IN THE LIGHT OF INSTITUTIONAL ECONOMY
Department of Agricultural Policy and Marketing, Faculty of Agricultural Economics, Warsaw University of Life Sciences (SGGW), Poland
The article presents two different economic behaviour
models of individual economic agents: homo oeconomicus and homo sociologicus.
The first model of rational actor (rationality of activities is the main assumption
in this model) has the basic assumption that an individual operates and behaves
rationally. Economic man is a man, whose basic principle is calculation of costs
and benefits (or rather profits and losses). The second model, being opposite
to the first one, assumes individual's socialization to the extent that one agrees
generally accepted social rules without any doubts. There are also displayed basic determinants of individual
behaviours (institutional rules and models, individual choices and mental models)
deciding on man's institutional derivation as well as a scheme of micro space's
The article presents two different economic behaviour models of individual economic agents: homo oeconomicus and homo sociologicus. The first model of rational actor (rationality of activities is the main assumption in this model) has the basic assumption that an individual operates and behaves rationally. Economic man is a man, whose basic principle is calculation of costs and benefits (or rather profits and losses). The second model, being opposite to the first one, assumes individual's socialization to the extent that one agrees generally accepted social rules without any doubts. There are also displayed basic determinants of individual behaviours (institutional rules and models, individual choices and mental models) deciding on man's institutional derivation as well as a scheme of micro space's institutionalization.
Key words: institutionalisms, homo oeconomicus and homo sociologicus, institutions of micro space, household, individual consumer.
Social, economic, information and cultural changes taking place since the end of the XX century caused the necessity of multidimensional look on spreading processes. Global processes, like information technologies development, are often perceived as a threat to existing civil rights and freedoms and as potential individual's weakening. Additional fears are caused by new institutions accepted in particular society, which can strengthen or weaken existing social order. In the author's opinion, internet can considerably strengthen position of both individual consumers as well as non-governmental organisations through developing contacts between members of particular community and spreading of their operation field. One of the possible ideas of social order is perceiving a state as an entity of violence and communities joined by the same values, rules and behaviours' models. Existing of a state as a formal structure is in the opposite to non-formal (or formal) communities. Existing of a community depends on power of social control, customs and habits, which can put pressure on community's members in non-formal way. A community can have formal and legal stricture becoming for example self-governmental institutions, association or foundation. One of the possible directions of holistic approaches of changes taking place for instance in economic, social, technological sphere has been institutionalism, determining institutional constraints of particular entities in social sciences .
Contemporary society is characterized by high specialization level as well as varied individual's needs, which are realized by different institutions. Institutionalism, as a direction of social sciences, can be found in many scientific disciplines, for example in economy, political science, sociology or anthropology. Institutional approach in the economic sciences was recognised not so long ago  as heterodox, straying from the main stream of economy represented by two major centres of economic thought – University of Chicago and Massachusetts Institute of Technology. Institutional economy has been accepted as an important part of economy. It can be approved by many researches , which stress that institutions can become a base of long-lasting development if they provide obedience to property laws, social conflicts' solutions and contribute to keeping order and law obedience. Critical opinions on institutionalism are evaluated as irrelevant because as it is emphasised "institutionalists restored economy character of social science and referred to old tradition of perceiving economy as a political economy" . Contemporary two main streams are distinguished: the old institutionalism represented by Th. Veblen, J. R. Commons, J. M. Clark and W. C. Mitchell as well as the new institutionalism represented by R. Coase and D.C. North or J. Menard.
Renaissance of classic representatives' thoughts of institutionalism is mainly connected with difficulties in explanation of differences in economic development in states of different values of economic development , as well as social involvement on rural areas , and implementation of economic reforms . Finally it was pointed, that individual economic agents are rational, inventive and persistent in the states with low income but they get only a part of potential income because there is a lack of "appropriate infrastructure of stimuli, which would activate productive cooperation in a social scale" . It is important that cooperation is a result both old as well as existing, newly established institutions, legal system including property rights and courts' jurisdiction and power of monopolistic arrangements . In the references it is underlined that a lot of solutions are accepted despite the fact that their implementations do not increase efficiency of any system. For example J. DiMaggio, W. W. Powell write that a lot of institutional solutions after "gaining some extension are spread in further organizations because they are recognised as authorized, not because they are more efficient or rational" . The aim of the paper is to identify institutional space of man's behaviours as an individual economic agent.
MAN'S MENTAL MODEL
A considerable part of individual choices of a man is described in the literature, especially in these positions which refer to consumers' behaviours and concern mainly relatively cheap and often bought commodities as devoid of rational calculation. A consumer buys mostly this, which was bought recently, operating according to a habit and alternatives appearing on market are not taken into account. A man's individual mental model allows interpreting phenomena and processes as taking place around this individual (Fig. 1).
|Fig. 1. Man rooted institutionally – micro level|
|Source: J.G. March, H.A. Simon 1964: Teoria organizacji. wyd. PWN, Warszawa; D. C., North 1994: Economic Performance Through Time. "The American Economic Review" June; M.R Somers 1993: Citizenship and the Place of the Public Sphere. Law, Community, and Political Culture in the Transition to Democracy, American Sociological Review, October, t 58 quotation from W. Morawski 2001:, Socjologia ekonomiczna. Problemy. Teoria. Empiria, wyd. Naukowe PWN, Warszawa, chapter. 1.4.|
This model is forming as a result of intergenerational transfer  of knowledge, values, rules and it is different between various ethnic and social groups. As the consequence there is a wide range of different individual mental models. Individual choice is based on a mental model, which is determined by a consumer's range of information on the world including knowledge coming from the environment of culture, social group, economic development as well as marketing operations taking up by firms. An individual's choice is a result of many factors including incomplete information on choice's possibilities. Purchasers often do not have information on results of choice both in short as well as further perspective. That is why they cannot evaluate both potential chances as well as threats. In the literature there are also opinions formulated that a society from the economic development's point of view, or from technological advance's point of view can be divided into traditional, modern and information society . It is stressed also that model of institutionalisation in organizational space used to be presented as two different but complementary models. The first model of rational actor (rationality of activities is the main assumption in this model) is described in the references as homo oeconomicus. This model has the basic assumption that an individual operates and behaves rationally. An economic man is a man, whose basic principle is calculation of costs and benefits (or rather profits and losses). This kind of men's attitude is described as a rational entity, whose behaviour is formed by a "system", which means relations of individuals building firstly rules of behaviours between themselves, in a micro scale, which later diffuse to mezo and macro scale. Diffusion of new rules lasts till the moment, when a new system is formed in macro scale, with new rules of behaviours accepted by majority. During analyses of man's market behaviours usually researchers focus on micro level referring to the tradition of methodological individualism .
The second model, being opposite to the first one, assumes individual's socialization to the extent that one agrees generally accepted social rules without any doubts. In the references this approach is specified as homo sociologicus. When a man's behaviour is analyzed from the homo sociologicus's point of view, he is treated as "an advocate of social roles" , which means formed by external factors. Since roles fulfilled by an individual are determined by economy, organizations and society (Table 1).
|Table 1. Homo oeconomicus, sociologicus – an attempt of confrontation|
|Type of attitude|
|Homo oeconomicus||Homo sociologicus|
|Subject||individual||group, community (individual as a member of community)|
|Motivation||own business||group business over own business, values (for example tradition, solidarity, freedom, equality, faith)|
|Criteria of evaluations||calculation rationality, utilitarian (for example profit versus loss)||variety of rationality and irrationality, normative (for example good versus bad)|
|Rule of functioning||free choice, hard constraints (for example capitals, stuff)||constraints in operation (soft), others operate, activities have different meanings, power of customs and habits|
|Space of functioning||market, private sphere||community (market is a social institution), public sphere|
|Rule of social space organization||individuals' interactions, according to preferences and procedural rationality||influence of policy (authority), according to criteria of substantial rationality (for example social justice)|
|Aims of analysis||forecasting||description, explanation, interpretation|
|Methods||formal, mathematical||empirical, quality|
|Methodology||reductionism, individualism||holism, organicism|
|Intellectual tradition||Smith, Marshall, Keynes, Samuelson||Markes, Durkheim, Weber, Parsons|
|Source: Own elaboration on R. Coughlin 1991, The Economic Person in Sociological Context. Case Studies in the Mediation of Self-Interest, w: Socio-Economics. Toward a new synthesis; Amitai Etzioni, Paul R. Lawrence (ed.), Armonk, N.Y. Sharpe and Smelser N. J., Swedberg R., 1994, The Sociological Perspective on the Economy, [in:] Smelser N. J., Swedberg R., (red.): The Handbook of Economic Sociology. Princeton, N.J-New York: Princeton University Press-Russell Sage Foundation quotation from W. Morawski 2001: Socjologia ekonomiczna. Problemy. Teoria. Empiria, Wyd. Naukowe PWN, Warszawa, chapter 1.|
Evaluation of individual economic agents from only rational behaviors' point of view or only social ones is incorrect. That is why model of "a social and rational man rooted institutionally" should be taken into account in order to evaluate behavior of individual economic agents. The following four analytical groups ought to be made :
institutional rules (patterns) having external character. An individual economic agent is fixed in the surrounding world through them. These patterns regards for example a family and relations within it, place of work and study, role of employer and employee, cooperation or its lack between employees and life in a particular society;
individual choices, consisting of decisions' making on the base of individual's information, experience and according to aspirations. Aspirations decide on rate, intensity and readiness for, for example gaining or ceasing looking for information;
mental models, regarding cognitive interpretation of information, which is made by an individual on the basis of own and social experiences;
individual's behaviours, concerning man's operations in economy.
A family as a subject in micro institutional space is an important group of community. Moreover, it is relatively coherent community basing on relationship. Age of related person can be a source of authority and a person, who rewards or punishes (a father's institution), is an authority personification. Neighbourly community can be a different example of a community, which is a territorial one . "Spirit community" based on friendship is pointed as the third kind of relations.
MODEL OF INSTITUTIONAL PROCESSES
Interpretation of behaviours on micro level can be done on the base of the institutional theory, according to which model of institutional processes consists of dimensions being both a factor, which determines as well as accelerates institutionalization process. Institutionalization model presented below concerns "spontaneous" implementation of institution into life. It is possible to use institutional analysis in case of individual economic agents (entrepreneurs and their families as well as business organizations). Groups of internal consultants in companies, groups of internet's users exchanging their experiences or trainings socializing managers within social marketing can be pointed out as examples of institutionalization at grass roots level. Process of objectification and process of legalization of an institution are also mentioned in the classical model of micro social institutionalization (Fig. 2). Process of objectification means mainly that institutions (through the fact that they exist longer than an individual man's life) are perceived as constant and the institutional world as objective reality by an individual. Processes of institution's legalization represent explanation and justification of necessity of particular institutions' existence, "not because, it [this process] seems to be less real (...) reality of social life becomes more convincing at the time of passing it down. However, this reality has a historic character, which gets to a new generation rather as tradition than biographical remembrances. Developing institutional order creates construction of legalization spreading shelter of cognitive as well as normative interpretations over it. New generations get knowledge on these legalizations in the process of socialization, thanks to which they become rooted in particular institutional order" . An individual is exposed on permanent influence of external surroundings (micro level) as well as for example culture of an organization on mezo level. Moreover, an individual is also affected by external surroundings, which mainly concerns acceptation of new rules of social life. Democratic, market rules and changing technological circumstances are for instance new rules. New institutional context causes that old institutions determinating rules for instance of political, economic, social and cultural system functioning are defined once more on all levels – macro, mezo and micro so they become in fact institutions with new image.
Among determining factors there are the following ones:
innovations of new institutions or whole institutional structures;
habitualization, which means creation of new structural configurations, which are an answer to existing problems, for example in particular organization. This activity leads to establishment of structures, which are classified as prior to institutional ones;
objectification meaning popularization (diffusion) of solution worked out, which is a kind of social consensus. Objectification allows preserving status of new solutions and structural configurations;
sedimentation meaning preservation of new institutions (solutions and structural configurations) in particular socio-organizational environment. This process is accelerated, when particular groups see positive results of new institution's implementation.
Realization of this process is recognized as a period of full institutionalization .
|Fig. 2. Scheme of institutionalization in micro space|
|Source: Own elaboration on Tolbert, P. S. and L. G. Zucker. 1996: The Institutionalization of institutional theory. [in:] Clegg, S, Hardy, C & Nord, W.R. (eds). Handbook of Organization Studies (p. 175-190). Thousand Oaks, CA: Sage. s. 181-184 quotation from Gonciarz B. 2004: Instytucjonalizacja samorządności. Autorzy i efekty, wyd. IFiS PAN, Warszawa, pp. 39.|
Role fulfilling by an individual in institutional space determines extent of market economy advance, an individual's participation in different organizational structures (companies, state-owned, private, social associations, foundations, etc.). A man's place between two poles: a rational man and a social one omits the whole scale of different types of behaviours, existing between these two opposites. Market operations are not realized when social relations are determined as aliening or as identical and also rate of particular actors' calculation can be distinguished in case of their distance, which is based on formalization of arrangement's conditions (clear arrangement) or lack of arrangement and lack of calculations. This approach, skipping extreme situations, can be limited to three fields: conflicts complaint with rules, market relations, and markets with mutuality standards. There is a reference to non market mechanisms of economic relations' regulations, for example law regulations contributing to deciding and solving disputes quickly and efficiently, without partiality in case of "conflict complaint with rules" (Fig. 3). Markets with mutuality standards concern to non market relations, which from the one side can be described as "logrolling" or nepotism and from the other side they can be non market works in favour of a community (for example neighbourly help or help from related community). Community of internet users is a different group, outside of existing opposite models of rational and social man. An internet user is usually presented as an independent individual, being in physical distance (alienation) without indirect contact with other individuals and at the same time as person looking for community. Simultaneously alienation, distance and anonymity connected with social control cause that this individual can "have a lot of faces" and play roles, creating his/her personage in the internet.
|Fig. 3. Scheme of institutionalization in micro space|
|Source: Own elaboration on Crouch C. Industrial Relations and European State Traditions, Oxford, Clarendon Paperbacks 1993 quotation from W. Morawski 2001: Socjologia ekonomiczna. Problemy. Teoria. Empiria, wyd. Naukowe PWN, Warszawa, chapter. 1.6.|
From the other point
of view, an internet user is characterized by more economic rationality, because
as a result of better access to market information, promotions, novelties, prices,
etc. What is more, a position of an internet user is strengthened by power of
community, which shares experiences, information of particular members.
In micro institutional
space consumers as well as organizations are analyzed through the prism of mental
models created on the base of various cognitive interpretations of surroundings.
The two described models: homo oeconomicus and homo sociologicus are two opposite
kinds of interpretation of individual economic agent's behaviour. From the one
side, ability to looking for rational solutions is the basic model of interpretation
of individual economic agents' behaviours and operations, from the other side
a high level of individual's socialization is assumed, which accepts community
rules and realizes group's aims instead of own goals. During an analyze of man's
behaviour according to the concept of homo sociologicus it should be mentioned
that researchers focus on a macro level, which means on an level of economy,
community or nation, there is a lack of approach considering mezo level (a level
of organization) or micro (level of a household and individual consumer). Various
institutional, individual and mental patterns are used in an analyze of individual
economic agent's behaviours. A scheme of micro space institutionalization can
be an instrument supporting interpretations of socio-economic phenomena within
the institutional theory in case of grass roots implementations of institutions.
Berger L., Luckmann T. 1983. Społeczne tworzenie rzeczywistości [The Social Construction of Reality]. wyd. PIW, Warszawa [in Polish].
Czarkowska L. 1999. Antropologia ekonomiczna. Elementy teorii [Anthropology of economics]. wyd. WSPiZ, Warszawa [in Polish].
DiMaggio P. J., Powell W. W. 1983. The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields, American Sociological Review, 48.
Etzioni A., Lawrence P.R. (red.) 1991. Socio-Economics. Toward a New Synthesis. Sharpe, Armonk, N.Y.
Gąciarz B. 2004. Instytucjonalizacja samorządności. Autorzy i efekty [Institutionalization of self-government. Author's and effects]. wyd. IFiS PAN, Warszawa [in Polish].
Morawski W. 2000. Zmiana instytucjonalna. Społeczeństwo, gospodarka, polityka [Institutional change. Society. Economy. Politics]. Wyd. PWN, Warszawa [in Polish].
Morawski W. 2001. Socjologia ekonomiczna. Problemy. Teoria. Empiria [Sociology of economics. Problems. Theory. Empiric]. wyd. Naukowe PWN, Warszawa [in Polish].
Moroda M, Wiklina J. (red.) 2002. Meandry instytucjonalizacji: Dostosowanie Polski do Unii Europejskiej [Institutional meander's: Poland adjust to EU – monitoring]. EU – monitoring VI. wyd. MSAP AE w Krakowie, Kraków [in Polish].
North D. C. 1994. Economic Performance Through Time, The American Economic Review June.
North D.C. The New institutional economics and development, Washington University, St. Louis, Internet.
Oedl-Wieser T., 2005. Institutional capacity building for rural women's empowerment in Austia, EJPAU 8(4)#1.
Pizło W. 2007. Instytucje w życiu społeczno-ekonomicznym – zagadnienia metodyczne [Institutions in socio-economic life – methodolical issues]. Acta Scientiarum Polonorum, Oeconomia nr 6 (4) 2007 [in Polish].
Stankiewicz W. 2005. Ekonomika instytucjonalna. Zarys wykładu [Institutional economics. Outline of lecture]. wyd. PWSBiA w Warszawie, Warszawa [in Polish].
Tolbert P. S., Zucker L. G. 1996. The Institutionalization of institutional theory. [in:] Clegg, S, Hardy, C & Nord, W.R. (eds). Handbook of Organization Studies. Thousand Oaks, CA: Sage.
Wilkin J. 1995. Jaki kapitalizm, jaka Polska [What is capitalism? What is with Poland?]. wyd. Naukowe PWN, Warszawa [in Polish].
Wilkin J. 2005. Wstęp: Dlaczego instytucje mają znaczenie? [w:] Instytucje – fundament czy fasada polityki makroekonomicznej? [Introduction. Why institutions are important? [in:] Institutions – foundation or facade of macroeconomic policy]. wyd. WNE UW, Warszawa [in Polish]
Williamson O.E. 1995. Transaction Cost Economics and Organization Theory, [w:] N. J. Smelser, R. Swedberg (red): The Handbook of Economic Sociology. Princeton, Princeton University Press, New York, Russell Sage Foundation.
Williamson O.E., The Economic Institutions of Capitalism: Firm, markets, Relational Contracting, New York 1985, The Free Press, London Collier Macmillan.
Zawojska A. Process of land reforms in Poland: explanation by using theories of institutional change and theories of political behaviour, EJPAU 7(1)#01.
Accepted for print: 17.10.2008
Department of Agricultural Policy and Marketing,
Faculty of Agricultural Economics,
Warsaw University of Life Sciences (SGGW), Poland
Nowoursynowska 166, 02-792 Warsaw, Poland
Responses to this article, comments are invited and should be submitted within three months of the publication of the article. If accepted for publication, they will be published in the chapter headed 'Discussions' and hyperlinked to the article.