Institutional economics and psychoanalysis: how can they collaborate for a better understanding of individual-society dynamics? Arturo hermann* may 2005


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As we have seen, institutional economics and psychoanalysis provide many contributions to the understanding of individual-society relationships. For this reason, we believe that the interaction between these disciplines could help us better understand many social and economic problems.

But, how can this interaction be achieved?

A first observation coming to the fore is that, as already observed, institutional economics has established a fairly systematic collaboration with pragmatist and cognitive psychology40; instead, collaboration between institutional economics and psychoanalysis has until now assumed a scattered character, mostly in the form of fleeting remarks which have been unable to provide anything like an organized treatment.

The same is true, more generally, for collaboration between psychoanalysis and social sciences. This does not mean that psychoanalysis has not tried to address the collective dimension of life. As we have seen, both Freud and later psychoanalysts have stressed the importance of the collective dimension of life and, in this regard, they have provided significant contributions to a number of social issues by applying the psychoanalytic framework. However, as far as we know, these studies rarely make use in a systematic way of concepts related to disciplines lying outside their own field.

Three groups of factors may have contributed to this situation: i) the difficulty for social scientists and psychoanalysts to go beyond the methodological scope of their complex disciplines; ii) a tendency among social scientists to interpret Freud’s work as being chiefly based on biological needs and thus, on these grounds, to be rather sceptical of its usefulness for analyzing social phenomena; iii) furthermore, the intrinsic multifariousness of psychoanalytic issues and the partly different views of psychoanalysts in this regard may have contributed to making it difficult for social scientists to feel at ease within the psychoanalytic field.
An interesting attempt to analyze the relationship between psychoanalysis and institutional economics was made by Schneider (1948). Although this work provides many useful insights — for instance, through an in-depth discussion about the possibility of linking cultural forms and psychological traits — it does not succeed, at least in our view, in clearly identifying the aspects where the collaboration between institutional economics and psychoanalysis could unfold.

The basic reasons for these limitations are to be found in the author’s interpretation of Freud’s and Veblen’s theories. It is assumed that Freud attributes all the importance in human behaviour to the “instincts”, which are supposed to be mainly driven by the “principle of pleasure”. This interpretation leads the author to identify an anarchistic strain in Freud’s theory, which would have led Freud to the conclusion that the repression of “instincts” is necessary for the existence of society. As a consequence of this view, the author considers Freud’s theory inadequate for the analysis of human behaviour and turns his attention to the contributions of the “neo-Freudians”, who have, in his opinion, the merit of having played down the role of “instincts” and brought to the fore the importance of social aspects of life.

The same line of reasoning is applied to Veblen’s analysis, though, in the author’s view, Veblen’s workmanship instinct makes his “anarchism” less definitive than Freud’s.

Needless to say, we find these conclusions, for the reasons set forth in the previous chapters, highly questionable41.

In addition to the previous discussion, we can observe that the claim that an instinct-driven behaviour is in itself anarchistic disregards the fact that, for instance, the life of animals — which is generally taken as a paradigmatic example of an instinct-driven behaviour — shows few signs of “anarchy” (whatever meaning one can attribute to this term) but, rather, a level of stability perhaps far greater than that of human life. Moreover, as evidenced by numerous studies, many species of animals show affective and cognitive attitudes in their behaviour.
In the analysis of individual-ISEF dynamics, psychoanalysis can contribute to a more complete understanding of the role played by psychological conflicts in determining the ISEF structure.

For instance, by considering the conflicts related to ceremonial/instrumental behaviour — and, relatedly, between workmanship and parental bent instincts, on one hand, and more aggressive and "acquisitive" propensions, on the other — psychoanalysis can, first at all, help attain a more precise identification of the social value process through which it is possible to distinguish and appraise different behaviours; secondly, it can stress the reasons why the ceremonial behaviour thus identified is more likely to be brought about, to varying degrees, by neurotic conflicts. Indeed, a great part of the psychoanalytic literature discussed above reports examples of neurotic-based ceremonial behaviour.

For instance, Freud investigates the neurotic reasons underlying ceremonial behaviour, which often takes the form of obsessive rituals, with reference not only to ancient populations (as in Totem und Tabu, 1912-1913), but also to contemporary ones (as in Massenpsychologie undIich-Analyse, 1921, and Das Unbehagen in der Kultur, 1930).

Another important implication of psychoanalytic methodology as regards the analysis of ceremonial/instrumental conflict is that, even if ceremonial behaviour is more likely to express neurotic conflicts, this does not imply that instrumental behaviour would necessarily be neurotic-free. In fact, also a very rational problem-solving procedure may be determined by conflicts and neurosis if "rationality" lies only in its "instrumental" element without affecting its "substantive" aspect42.

It is important to stress that, as observed before, this statement does not seem in contradiction with Veblen’s view of instrumental behaviour as a way to eliminate ceremonially-based habits of thoughts.

Within this ambit, psychoanalysis can contribute to the understanding of the conflicting and neurotic elements associated with each collective context by applying the instrumental procedure envisaged by Veblen and others (e.g. the scientific methodology).

As seen in the previous chapters, a number of studies have shown, from a psychoanalytical perspective, how people tend to regard institutions43.

In fact, even institutions may be partly determined by — and may determine, as well — individual conflicts and neuroses. Furthermore, as already noted, institutions are important for individuals not only with regard to their real functions but also because of their symbolic meanings. This means that, to a certain extent, individuals regard institutions not in their reality but according to their own unconscious conflicts and fantasies which, in turn, are partly socially determined.

In this sense, the characteristics of every culture — including, of course, the characteristics of the family setting — are likely to play a pivotal role in determining the course that individual conflicts will take.

In this respect, it is interesting to observe that even conflicts and neuroses, since they are in part socially and culturally determined, present an evolutionary character44.

For instance, it is well known that in the feudal economy neurosis acquired a distinctive nature, different from the prevailing nature of modern-day neurosis; or, to consider another example, hysterical symptoms — which constituted the basis from which Freud’s theory sprang — seem to have drastically diminished over time, chiefly as a result of less repressive educational methods.

At this stage, we can employ one of Veblen’s fundamental insights — the definition of institutions in an evolutionary way as an outgrowth of habits of thoughts and life — in order to include within this definition the psychoanalytic concept of neurosis. In this sense, institutions, and more generally, social and cultural forms, can be regarded as an outgrowth of habits of thoughts and life which may concur to form — and, at the same time, are partly formed by — individual conflicts and neuroses45. Within this analysis, important psychological and psychoanalytic concepts can help attain a more complete understanding of the complex meanings of habits, which concur to determine their typical unconscious and rather 'sticky' nature: for instance, as noted before, the complexity of instincts, the role of internalization of norms and model of behaviour in child development, the role of the Freud's notion of "compulsion to repeat", the importance of symbols and fantasies in individual and collective life and the multiple and interrelated levels (in particular, individual, family-based, social and cultural) of the concept of identity.

It is important to note that this definition does not imply a negative concept of institutions but, rather, takes into account their conflicting and complex roles. Within this scope, the role of institutions in their complex and interrelated articulations — as stated by Commons (1934: 69) "....all the way from the family, the corporation, the trade union, the trade association, up to the state itself...." — as a necessary medium for the person to establish object and interpersonal relations would deserve paramount attention.

In fact, institutions are in many cases, as stressed above, a necessary element for liberating and expanding individual action; this means that this concept implies also the consideration of psychological factors in these dynamics—as was accomplished by Commons through the elaboration of the concept of "negotiational psychology".

Furthermore, conflicts and neurosis should not be regarded as something “bad or abnormal” but as the expression of the structure of human personality, with all its problems, weaknesses, contradictions and ambivalences. As appears from this short description, some of the reasons why we believe the interaction between institutional economics and psychoanalysis useful is because it can cast more light on the following interrelated issues:

  1. The evolutionary and conflicting nature of individual and collective structure of values and motivations, and of the related decision-making process.

  2. The evolutionary interaction between individuals and institutions in the formation of interpersonal relations, expectations, identity and values, and the role of conflicts and aggressiveness in the dynamics of these processes.

  3. The evolutionary and conflicting nature of habits, routines, organizations, institutions and collective knowledge.

  4. The evolutionary and conflicting nature of ethics and morality.

  5. The possibility of economic and social reforms, and the role of policies.

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