Institutional variety and the future of economics

Abstract

Economics depends heavily on assumptions made about the phenomenon of institutional variety and its implications for technological capabilities in economic development. This article contributes to new ways of thinking of institutional variety in order to advance scientific argument within the broad tradition of evolutionary political economy (EPE). First, it draws on the Nyāya (Hindu) systems of logic and reasoning about inference and judgement which can potentially reveal inter-and intra-paradigmatic differences for EPE and economics. Second, it uses four brief illustrative cases from the author's development research on technological learning and innovation to argue for more explicit and systematic treatment of inference and judgement about institutional variety. Implications for the future of economics are briefly discussed.

Institutional Variety and Ayres-Veblen “Lag”: Implications for Selection and Development

“…A focus on institutional variety offers us potential connections to the original institutional economics (OIE). As I have argued (Srinivas 2012(Srinivas , 2016(Srinivas , 2020, development economics tends to approach such institutional variety from the vantage point of instrumental quasi-optimization over time and as ordered convergence of economic structure and institutions, whether through dominant institutions such as markets where societies of one kind become more like another, or because priorities of social relevance are filtered through primarily market outcomes. Depending on the training or sense of adventure of the economist, some non-market institutions such as values and social custom may also be prominent in their analysis, for example a focus on some ethnic groups in specific types of business activity, or contracts and intellectual property established or enforced through familial, linguistic, or geographic ties of trust rather than arms-length legal recourse.…”

“…Thus, there remain important theory differences and policy consequences in the epistemology and methods of "late industrial" development where institutional variety is considerable. These result in unresolved gaps in a taxonomy of phenomena about what technological capabilities are being built, but also a lack of clarity of what inferences and judgments to settle on from such phenomena (Srinivas 2020). Can the Ayres-Veblenian concepts of institutional "lag" inform this developmental challenge of institutional variety?…”

“…In this gap, alternate systems of logic which are precise about types of perception and burdens of proof may help strengthen economics' inferential foundation. Nyāya and Vedānta (of the six Hindu Schools of philosophy), or other pre-Cartesian perspectives on reason and consciousness can provide context to individual perception and action, including collective "direction" (Srinivas 2020). When a systemic, co-evolutionary approach is used to study technological capabilities, intermediate heuristics and methods will require explicit attention.…”

“…The argument here is that institutional variety within the "industrial" sphere is sizable and worthy of attention in its own right. A closer analysis serves to explain the context in which technological change today can contribute to the OIE while drawing on evolutionary perspectives and development phenomena, lest tooeasy or universal inferences and judgments emerge about industrial policy design (Srinivas 2018(Srinivas , 2020). Ayres's emphasis may have been on what Philip Klein (1995Klein ( , 1190 terms pejorative labeling of obstructionist institutions that do not adapt to technological changes "ceremonial, make-believe, status, feudal, taboo, mystic, legendary, mythic, superstitious, etc."…”

“…However, the systems of institutions cannot rely on expost analysis of industrialized economies to direct development (Arocena and Sutz 2000) and development policy cannot be universally valid. Therefore, is institutional variety "good" for development, and should such variety disappear over time or with income convergence (Srinivas 2020)?…”