Institutional Change and Learning

I write a lot about institutional change. And I used to think I had a reasonably solid understanding of what I meant by the term. For example, I once wrote “I’m interested in institutional change; in how the institution of higher education changes rather than in how changes occur in educational institutions, although the two are not unrelated of course.” I thought of institutional change as something meta-organizational, although I’m not sure how I would have responded if someone had pressed me to elaborate. I probably would have stumbled around with thoughts like this: the institution of higher education, at least in many societies, plays a gatekeeper role to jobs, income, status, and social mobility.

Earlier this month I decided to see how people in diverse content areas used the term institutional change. I started with economics and quickly uncovered what’s called the new institutional economics. My intention was to cast a wide net across multiple disciplines, but that will now have to wait for another time. I never proceeded past the niche where I started.

In December 1993, Douglass C. North shared the Nobel Prize in Economics for his work in institutional economics. His Nobel Lecture on “Economic Performance through Time” is wonderfully accessible to non-economists. When I read the lecture, I was struck by three things. First, North saw institutional change as clearly central to understanding how economies evolve over time. Second, North saw learning as clearly central to understanding how institutions change (e.g., “The most fundamental long run source of change is learning by individuals and entrepreneurs of organizations.”) And, third, North’s language was so explicit it seemed likely that a model could be constructed.

It was a wonderful find. Here was a Nobel laureate writing in a literate style about institutional change and learning, two things that most occupy my thinking now. So I prepared a concept map based on North’s 1993 Nobel Lecture. In doing so, I used Cmap Tools from the Institute of Human and Machine Cognition (IMHC). Cmap Tools is free for educational institutions, employees of the U.S. Federal government, and individuals using it for non-commercial purposes (download here).

You can access my concept map using either Cmap Tools or a browser. Cmap Tools provides various ways to interact with the map that are not possible with a browser (e.g., pop-ups with quotes from North when the cursor hovers over a concept). But you can also use a browser and view the quotes in this PDF. Links are listed below for the various ways to access the concept map.

I’m not going to describe North’s model in detail here. Read his lecture and view the concept map instead. Rather, I’ll concentrate on only a few notions that focus on the following questions: Does North’s model provide guidance on the location and nature of interventions most likely to affect how institutions and an economy change? In particular, what role does education and learning play?

North views institutions as a humanly devised matrix of formal and informal constraints and their enforcement mechanisms. Examples of formal constraints include laws and regulation; examples of informal constraints include belief structures and accepted norms of behavior. This matrix forms the “rules of the game” that is then contested by players (individuals, entrepreneurs, and organizations). They do so under conditions of uncertainty and with limited knowledge of what other players are doing. North’s view is based ultimately on the assumption that scarcity is the central economic problem, that competition derives from scarcity, and that markets provide one mechanism for distribution of scarce resources (although the markets are not efficient in the manner that neo-classical economists would assume).

Assumptions, of course, are always pivotal and open to critique and challenge. I don’t intend to go that route. I’d rather play with North’s model by granting him the assumptions. Model-building is always an iterative process and assumptions need not be sacrosanct if the model misses the mark.

I like North’s definition of institutions and their web-like fabric as incentives in a game. I also like the recursive nature of the game being played. Change happens because players of the game experiment with existing rules, finding opportunities, and chafing at constraints. As the players learn, their mental models about what is possible change and eventually their beliefs about what <em>should</em> be possible also change. Coincident are changes in the rules themselves. So you get this very rich and complex interaction of players learning and rules morphing or being created. The image doesn’t lend itself to easy understanding about where or how to intervene in the process. But it does ring true, that change is something always in the process of becoming, that economic or social or educational reality is anything but real, but rather is a work of art in constant creation.

North bases his learning concepts on cognitive science. This is one area where he seems on thin ice. I suspect that those working in the edublogging world today, with its theories of connective and networked learning, could add immeasurably to this part of the model.

At the time North delivered his lecture, the concept of technology largely existed external (i.e., exogenous) to his model. In 1994 North and John J. Wallis wrote an article that tried to integrate technology and institutional economics (Journal of Institutional and Theoretical Economics, 150/4). I’ve not yet read that article, nor have I read North’s 2005 book Understanding the Process of Economic Change. But clearly, in 1993 North seemed headed toward an integration of demography and technology into the model.

In building the concept map, the take-home lesson for me was the creative miasma consisting of players experimenting, reinventing, and constructing rules of the game just by looking in new ways at what exists and what is possible. It’s something that all of us can do. But I’d argue, as I’ve done elsewhere, that instantiating possibilities requires the hard glare of market survival – even though future organizational forms may be considerably different than today. As North might say, we need to play the game today for things to change tomorrow.

Originally posted 01-April-2008 by Gary M. Lewis on http://garymlewis.typepad.com/educational_imaginations.

Permalink: http://garymlewis.com/instchg/2008/04/28/institutional-change-and-learning/

Links

1. If you have Cmap Tools installed and opened on a computer, access the concept map from the Views – Cmap Tools window by migrating to Shared Cmaps in Places > IHMC Public Cmaps (3) > Users > garymlewis > Economic Change (North) and opening the map called North.

2. Otherwise you can access several browser versions of the concept map that vary by the level of detail. I recommend that you look at all three in order from least detail to most detail, and then use the most detailed map to coordinate with North’s quotes in the PDF. Use the following links in the order listed:

Least Detailed Map

Detailed Map

Most Detailed Map