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



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The role of habits
The concept of habit has played a key role within the Pragmatist approach, also for its influence on institutional economics. In this regard, important contributions were provided by William James, who, in his Principles of Psychology, investigates the role of habits in both individual and collective dimensions.

In the individual dimension, the propension of the person to form habits is explained by James as a result of the circumstance that, in his words,


“Man is born with a tendency to do more things than he has ready-made arrangements for in his nerve centres....If practice did not make perfect, nor habit economize the expense of nervous and muscular energy, he would therefore be in a sorry plight.”, (James, 1890: 113).
In this sense, the set of personal habits plays the important function of reducing the conscious attention upon such habits. This entails the apparent paradoxical result that the person, although routinely performing a number of actions, is unable to know how he or she has performed them3. This concept is expressed in the following passage,

"We all of us have a definite routine manner of performing certain daily offices connected with the toilet, with the opening and shutting of familiar cupboards, and the like. Our lower centres know the order of these movements, and show their knowledge by their 'surprise' if the objects are altered so as to oblige the movement to be made in a different way. But our higher thought-centres know hardly anything about the matter. Few men can tell off-hand which sock, shoe, or trousers-leg they put on first. They must first mentally rehearse the act; and even that is often insufficient—the act must be performed.", (James, 1890: 115).


The interesting aspect of this analysis is that, in describing some important features of personal habits, it also casts light on the role of collective habits in social dynamics. As a matter of fact, habits constitute the normal functioning not only of personal life but also, in a complex interplay of reciprocal influences, of collective life; the following passages express these concepts vividly,
"Habit is thus the enormous fly-wheel of society, its most precious conservative agent. It alone is what keeps us all within the bounds of ordinance, and saves the children of fortune from the envious uprising of the poor. It alone prevents the hardest and most repulsive walks of life from being deserted by those brought up to tread therein. It keeps the fisherman and the deck-hand at sea through the winter; it holds the miner in his darkness, and nails the countryman to his log-cabin and his lonely farm through all the months of snow; it protects us from invasion by the natives of the desert and frozen zones....It keeps different social strata from mixing.", (James, 1890: 121).
This analysis of habits is closely related to the role that the continual flux of actions plays on their formation; In fact, habits are acquired or eliminated cumulatively and are intimately connected with the system of values of the person. This is related to an important concept of Pragmatism, namely, that individuals do not unfold their personalities in abstract terms but out of their actions in both the individual and collective spheres.

In this sense, habits constitute the "psychological procedures" through which the emotions, motivations and values of the person are expressed. Consequently, habits are not "neutral" and "automatic" instances as they convey, partly at an unconscious level, all the complex, often conflicting, aspects making up the individual personality.

Thus, it is necessary to continually improve personal behaviour through acquiring "moral habits" and eliminating bad ones; this process is described in the following passages,
"No matter how full a reservoir of maxims one may possess, and no matter how good one's sentiments may be, if one have not taken advantage of every concrete opportunity to act, one's character may remain entirely unaffected for the better....There is no more contemptible type of human character than that of the nerveless sentimentalist and dreamer, who spends his life in a weltering sea of sensibility and emotion, but who never does a manly concrete deed....Every smallest stroke of virtue or of vice leaves its never so little scar. The drunken Rip Van Winkle, in Jefferson's play, excuses himself for every fresh dereliction by saying, 'I won't count this time!' Well! He may not count it, and a kind Heaven may not count it; but it is being counted none the less. Down among his nerve-cells and fibres the molecules are counting it, registering and storing it up to be used against him when the next temptation comes. Nothing we ever do is, in strict scientific literalness, wiped out. Of course, this has its good side as well as its bad one. As we become permanent drunkards by so many separate drinks, so we become saints in the moral, and authorities and experts in the practical and scientific spheres, by so many separate acts and hours of work.", (James, 1890: 125, 127).
James’s theory, as well as those of other important pragmatist philosophers — such as J.Dewey and C.S.Peirce — constitutes the main theoretical springboard from which institutional economics arose.

By developing these insights, institutional economics has stressed in many contributions the twofold nature of habits. Indeed, habits embody and synthesize, in an evolutionary way, all the principles, values and knowledge accumulated over time. In this sense, they exhibit in every context both the ceremonial and instrumental aspects highlighted by institutional economics.

As described effectively by Veblen, ceremonial behaviour is rigid, past-binding and based on a passive acceptance of the norms followed. In contrast, instrumental behaviour possesses a matter-of-fact quality aimed at problem solving activities.

Within this ambit, technology-based activities are considered, especially in Veblen’s and Ayres’s analyses, the best example of instrumental behaviour. From these insights, it ensues that habits constitute a necessary factor for accumulating knowledge within institutions and, at the same time, an element which may hinder this process. However, as we will see in the next chapter, the role of technology in fostering economic and social progress is very complex as it requires the analysis of many interrelated aspects.




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