Institutions: Adaption and Maximizing Internal Traits

Institutions have a profound influence over the lives of the individuals they govern.  However, the public rarely talks about them or understands the concept of institutions.  I would like to speak about the importance of institutions from the left-libertarian perspective, as the subject is sometimes neglected within libertarian circles.  I will first define the institution and explain how they work.  I then investigate how institutions influence society and how society influences institutions.  I then cover the left-libertarian perspective on who should control institutions.  Last, I introduce the idea that institutions should maximize particular human traits and that left-libertarianism should be viewed as an evolving system with tendencies rather than specific institutional models.

In the following, I draw mainly from Institutional Economics and philosophers such as John R. Searle since they provide the most in-depth and comprehensive account of the subject.  Institutional economics (sometimes called American Institutional Economics or Old-Institutional Economics) is “an approach to economics that sees economic life as taking place within a social context” and views “human behavior as determined more by social factors than by deliberative individual thought.”[i]

Institutions:  A Brief Examination

Geoffrey M. Hodgson defines institutions “as durable systems of established and embedded social rules that structure social interactions.  In short, institutions are social rule systems.  They both constrain and enable behavior.”[ii]   Simply put, institutions are the structures within society that govern human interaction.  Institutions can include things such as government (congress, executive, military), economic institutions (private companies, brokerage firms, free market, money), legal institutions (private property, laws of the land), special-purpose institutions (church, schools, unions), and unstructured institutions such as family and friends.  Many of the rules that govern society are unseen.  In other words, they create norms and customs by which we live without our direct knowledge of their existence.  For instance, if one where to walk into a business seminar, individuals don’t need to be told to remain sitting, not to constantly interrupt the speaker, or make obscene noises even though there is no explicit rules before entering.  Concert goers realize the same rules do not apply as a business seminar and that it might be customary or even desired to act rowdy.  Therefore, if we change the institution, we change the way people interact with others, how they behave, and ultimately how they think.

When we look at institutions, we are penetrating behind the surface of the world we live in to see the rules that constitute our social lives.  But the rules are very different from those of physics.  Institutional rules aren’t imbedded in the physical world like the laws of gravity.  If institutional rules are not embedded in nature, where do they come from?  I hesitate to give too much of a philosophical account on this subject because it would be too time consuming.  But I will at least give a brief description.  We can define three primary structures which underlie institutions: collective intentionality, status function, and constitutive rules.  Philosopher John Searle suggests that institutional rules have their existence because people have come to collectively accept or recognize a particular status given to the institution. These are referred to as collective intentionality (sometimes called intersubjectivity).  This isn’t to say that one believes a particular institution to be legitimate.  For example, enough people in the U.S. believe in an institution called the “presidency.”  So collectively, people have to come to believe there is such an institution and will act accordingly by voting or recognizing George Washington as the first U.S. president.  Secondly, a status function is when humans “have the capacity to assign functions to objects, where the object does not have the function intrinsically but only in virtue of the collective assignment.”[iii]  For instance, a one hundred dollar bill is just a piece of paper.  But it has a status because enough people have come to believe that it has a particular function and that we can use that function to carry out particular tasks such as buying groceries.  Last, we have constitutive rules which are a number of guidelines and procedures such as driving on the right side of the road, rules of a game, or hierarchical private companies.  While institutions can be extremely complex and vary from states to paper money, “the principles that underlie the constitution of social reality are rather few in number.”[iv]  These three classes of institutions can be said to consist of a “single unifying principle” analogous to the atom in physics or DNA molecule in genetics.  As I mentioned above, the topic is a bit more complex; but the important point to realize is that human beings give power to institutions and they exist because we collectively accept them.

A more specific question to ask is: Why do we have institution in the first place?  There are a number of answers to this question.  But for the most part, people benefit from institutions because they make life easier and they allow individuals to associate with one another to materialize their desires.  We have gone from the days of hunting and gathering to acquiring massive wealth.  As libertarian-socialist, Robin Hahnel states, “institutions are the necessary consequence of human sociability…. Any institutional boundary makes some individual choices easier and others harder, and therefore infringes on individual freedom to some extent.  But abolishing social institutions is impossible for the human species.”[v]  I would like to return to the possibility in how an institution “infringes on individual freedom” later.

Many institutions are specifically designed or engineered to bring about particular results.  Capitalism is a system that distributes wealth and power.  The State acts as a monopoly on the use of force to control certain behaviors.  These institutions can be said to contain elements of rational action because they are designed with a number of rules, incentives, and relationships of power in order to create end results.  In most cases, the people who design the institution or those who head the institution tend to benefit the most from them.  Over time, institutions become normalized and individuals in society come to believe that the institutions that guide them are somehow natural or god given.  However, most institutions are the creation or byproducts of human beings.  In many cases, institutions become completely entrenched in society and within the minds of individuals.  Historically, as institutions age, they become invisible and people stop recognizing how they control human actions. In short, institutions just become part of the societal landscape.  But even when one does recognize institutions, even unjust ones, people “despair of ever being able to change it.  Yes, the distribution of property is unjust, and perhaps there is something unjust about the institution of private property itself, but there isn’t much that an individual can do about it, so the individual tends to feel helpless in the face of the institution.”[vi]

Institutional Effects on Society and Societies Effects on Institutions

In the following paragraph, Searle demonstrates the number of institutions that surround us by italicizing institutions Searle interacts with throughout his day:


As one can see, humans are imbedded into world of institutions, many of them constituting the way we act, live, and socialize with others.  What’s interesting to note here is how little control we have over institution but how much power they exert over individuals and society.  Individuals are surrounded by unseen mechanisms that control human behavior and compel them to act in certain ways.  Depending on the institutions, they can help to liberate or they can cage us like rats in a maze.  Does that mean that institutions predetermine personality, habits, thoughts, etc.?  The answer is simply, no.  People who believe that institutions predetermine individual personality reduce themselves to mere automatons, remove human agency, and neglect to see the mechanism by which individuals change institutions.  Over the course of time, humans do tend to alter institutions especially when we consider that many ancient institutions no longer exists such as aristocratic feudalism or certain forms of slavery.  People do influence institutions, but only indirectly.  At the same time, we keep them functioning because we participate in them.  In effect, “by getting married a couple unintentionally help to reproduce the institution of marriage; by going to work the worker unintentionally helps to reproduce the social relation of wage labour/capital; by paying rent the tenant unintentionally helps to reproduce the social relation of landlord/tenant.  Thus social structures constrain and enable the very practice through which they are reproduced.”[viii]

It would be convenient to say that we could simply stop participating in unwanted institutions to dispose of them.  However, reality is more complex especially when you have to account for the fact that human survival depends on working for someone else to receive wages, we have to pay taxes or go to jail, or conform to specific customs or be ostracized.  Another problem develops because there is an interconnected system where economic systems connect to the state apparatus, social customs are formed by education, family and church, and all of these institutions influence one another.  As Richard Wolff states:

“…the economic aspects of society influence the noneconomic, and the reverse holds true as well.  For example, economic considerations certainly influence decisions about marriage and family, and family considerations likewise influence the economic decisions people make.  Economic calculations affect U.S. foreign policies, and foreign policy decisions make their marks on our economy as well.”  In other words this “view assigns no priority to economic over non-economic aspects of society as determinants of one another.  All the different aspects shape and are shaped by all the others.  No one part of society, neither the economy nor any other part, determines the whole of society.”[ix]

In other words, to act within one institution helps to reproduce other institutions which thereby changes social norms, customs, and culture.  In effect, one is unknowingly participating and reproducing systems of control with little influence and guidance.

Who Should Control Institutions? 

At this point, I would like to introduce a left-libertarian perspective on the subject of institutions.  Thus far, we have discussed what institutions are, how they function, and how they reproduce over time.  Individuals are born into a number of institutions which guide their life, thoughts, habits, customs, beliefs, and human action.  Why should it be that individuals are born into institutions or that they have very little influence over them?  The answer is pretty straight forward — especially when we are talking about our main institution such as the state (including the military, executive, legislation, etc.), private companies, private property, organized religion, media, and the educational system. All of the above have an organized hierarchy where power and control is distributed to the few and those members directly benefit from such organization.  An owner of a private company or the head of a church have little to no incentives to change the organization.  Instead, they exert massive power and control over the people they govern.  In many cases, institutional heads have been willing to use violence to uphold their power and status.

If it is true that institutions have massive control over the individual and society, it seems reasonable to say that the people who are shaped and affected by institutions should be the ones who directly control them.  However, institutions are a social phenomenon which influences a number of people.  The only way to have individuals influence institutions is by giving them direct control over them.  The above implies two important left-libertarian concepts.  The first concept implies that power is evenly distributed within the organization. For instance, in the case of the firm, all members share power rather than redistributing power to the top of a hierarchy.  Secondly, those affected by the institutions should have control directly proportional to how it affects their life.   To simplify this concept, let’s take a local community. It seems that I should have more influence over the local community than a community 500 miles away.

What I am suggesting is that individuals should be the ones to design and engineer the institutions that influence their life.  Only individuals have the incentive to make institutions fit their specific needs and the desire to fulfill their wishes.  The above necessitates a complete transformation of our main institutions especially since the vast majority of individuals have little say over the mechanisms that control their life.  The ecological, cultural, or economic problems facing the world today are so severe; tinkering with our institutions is no longer a viable option.  Times have changed especially in the last 200 years, yet our institutions remain relatively the same.  This is analogous to using a donkey to plow fields when we have better alternatives.  Emma Goldman explains, “Our institutions and conditions rest upon deep-seated ideas. To change those conditions and at the same time leave the underlying ideas and values intact means only a superficial transformation, one that cannot be permanent or bring real betterment. It is a change of form only, not of substance…”

One common objection is that people are not smart enough to create their own institutions because they lack intelligence.  There are a number of responses to this objection most of which are outside the scope of this article.  But a couple of points should be made.  First off, we don’t need to ask if people are intelligent enough because left-libertarians institutions have already existed and many of them remain today.  We even have schools where students K-12 self-manage their education without any problems.  During the Spanish Civil War, large parts of Spain became self-managed from the workshop to the community, again, with very few problems.  In places like Argentina, workers took over abandoned factories during an economic collapse and started production without hierarchy with huge success.  We even have common lands being used that are self-managed such as community gardens.  Secondly, institutions have what might be called a “constitution” with a number of rules, guidelines, and goals.  Once a constitution is established, members of the organization act within the framework.  Last, left-libertarians are not demanding that institutions be abolished, but they should be organized differently.

Intuitions can be, or should be specifically engineered to bring about particular results because they “lock into human rationality.”[x]  Institutions are social conventions and they don’t appear out of nowhere.  They are usually designed and those designs benefit the people who logically construct them.  The question to ask is: what should institutions be designed to do?

Institutions and the Maximization Process   

As stated before, institutions infringe “on individual freedom to some extent.”  Institutions are a byproduct of social interaction and even giving a gift or speaking a particular language fall within the category of institutions. Therefore, institutions are a permanent aspect of society.  Robin Hahnel makes the point that “The relevant question about institutions, therefore, should not be whether we want them to exist, but whether any particular institution poses unnecessarily oppressive limitations, or promotes human development and fulfillment to the maximum extent possible.”[xi]

In my opening paragraph, I stated that institutions “should maximize particular human internal traits and that left-libertarianism should be viewed as an evolving system with tendencies rather than specific models.”  I would like to answer the following questions below:

  1.  What does it mean to maximize particular internal traits?
  2.  What traits should be maximized?
  3.  Why and how should institutions evolve over time?
  4.  Why have tendencies rather than model building?

Institutions can bring about certain traits within individuals who interact with them.  In effect, an institution can empower the individual and allow certain behaviors, social norms, thoughts, and emotions to flourish.  For instance, workers’ self-management produces positive social attribute such as cooperation and autonomy.  On the other hand, private companies tend to maximize negative human attributes such as selfishness and paternalism.  While I’m painting with a broad brush and each case is different, on the aggregate, these traits do tend to appear in individuals within these institutions.

To maximize something means to increase as much as possible.  When I say, the “maximization process” I mean that we create institutions that maximize particular traits and values that allow for human flourishing.  The maximization process shouldn’t be considered a hard and fast rule or even a specific model.  In fact, each institution is very different and some attributes may not be needed or even wanted depending on the organization.  In each case, individuals design the institution rationally as possible with the goal to provide particular outcomes. It is important to realize that institutions and organizations work within a framework so there are boundaries that institution must work within.  Institutions are vastly complicated networks.  Economic institutions effect non-economic institutions, and so on.  While one may wish to sit around singing “Kumbaya, my Lord”, the external world is a factor that must be considered, otherwise, members suffer consequences.

The goal of left-libertarianism is to maximize positive human attributes within rational limits rather than anti-social ones.  Left-libertarians believe that many of our current institutions produce negative traits within individuals.  To quote Kropotkin, “When we ask for the abolition of the state and its organs we are always told that we dream of a society composed of men [and women] better than they are in reality.  But no; a thousand times, no.  All we ask is that men [and women] should not be made worse than they are, by such institutions!”[xii]  Again, this points to the need for individuals to design institutions rather than the select few who design them in their own self-interest as they do today.

Which attributes should we maximize within individuals?  As stated before, there are no set rules.  Most left-libertarians may suggest liberty be maximized in all cases but I believe this to be naïve in some cases.  For instance, if someone is teaching a course on knitting, it would seem strange to maximize the liberty of each individual.  You wouldn’t want someone to constantly interrupt or shout slogans during the course especially when it infringes on other people’s liberty.  Instead, it might be better to maximize creativity and self-reliance in such a situation.  There are many other values such as well-being, fraternity, self-directedness, integrity, honesty, justice, responsibility, reciprocity, equality, and other values that lead to an enriching life.  The whole point of left-libertarianism is to find positive traits and values and maximize them within rational limits so they are expressed within the individual that interacts with the institution.   To quote Aristotle, “The end and purpose of a polis is the good life, and the institutions of social life are means to that end.”

There is also the question of how institutions evolve over time and why they survive in the first place.  Anything that replicates itself or reproduces itself with slight modification, such as DNA, by definition will evolve over time.  Institutions are no different.  They replicate themselves and are slightly modified over the course of time.  Institutions shouldn’t be viewed as static, but dynamic systems that require alterations to make changes to the real world.  The term “evolution” is sometimes equated with progress.  However, Hodgson observes that “evolution does not drive towards some goal or destination.  Instead it carries the baggage of its past, in a typically haphazard, ongoing process of adaptation and selection.  It is important to dispense with all mistaken notions of evolution as an optimizing, goal-driven or necessarily progressive process.”[xiii]

One of the major problems with the state is that it has a hard time adjusting to changes.  Part of the reasons for this factor is that states are extremely large, centralized, and bureaucratic due to top-down planning.  Furthermore, because of the size of the state, when it makes mistakes, such as an economic mistake, it doesn’t just affect a small part of the whole but everything it governs.  Left-libertarians suggest that organizations be smaller, decentralized, and bottom-up institutions.  This type of organization is more suitable and adaptable to changes that happen in the real world.

Private enterprise also suffers because entrepreneurs lack sufficient knowledge of other market actors, use centralization, and top-down planning which minimizes the information and knowledge pool of its employees while also creating bureaucracies.  Kropotkin has also shown that “survival of the fittest” (a phrase coined by Herbert Spencer rather than Darwin), plays a much smaller and decisive role than mutual aid.  Instead of a society based on survival of the fittest, it would be better to have institutions based on resilience.  Resilience is “the capacity of a system to absorb disturbance and reorganize while undergoing change, so as to retain essentially the same function, structure identity and feedbacks.”[xiv]  Cooperation taps into knowledge pools which we otherwise wouldn’t have while also taking advantage of localization.  In any case, it seems odd to subject individuals and society to “survival of the fittest” as though it’s some positive virtue.  It’s not.  I suggest that left-libertarian institutions dispense with many of the negative attributes such as lack of information, a purely “survival of the fittest” mechanism, and move toward optimization, localization, cooperation, transparency, resilience, mutual aid, and rational goal setting.

I would like to suggest that left-libertarianism has tendencies toward particular institutions rather than rigid institutional models.  By tendencies, I mean “an inclination toward a particular characteristic or type of behavior.”  There are many types of institutions and it would be impossible to build models of each of them because the institution of money is vastly different from the institution of capitalism or the state.  Today, there are major dissatisfactions with our political and economic institutions especially because the public has little ability to control their intuitions and some even feel imprisoned by them.  Instead, left-libertarianism believes that those affected by institutions should be the ones to design them within a particular framework.  The framework uses institutions not to create invisible cages but to maximize positive internal traits. It is finally time for left-libertarians to start to talk about alternative institutions.  If we spend 95 percent of our time talking about the evils of the world and only 5 percent giving an alternative, we will sow apathy, helplessness, and powerlessness within society.  While the left-libertarian slogans such as “Against All Authority,” are perhaps clever, they are only that: slogans.  In reality, left-libertarianism is a socioeconomic and political movement which has tendencies toward the liberation of every human being.


[i] Pressman, S. (2003). Institutionalism. In J. King (Ed.), The Elgar Companion to Post Keynesian Economics (p. 196). Northhampton: Edward Elgar Publishing Limited.

[ii] Hodgson, G. M. (2004). The evolution of institutional economics: Agency, structure and darwinism in american institutionalism. (1st ed., p. 424). New York: Routledge.

[iii] Searle, J. R. (2008). Philosophy in a new century: Selected essays. (1st ed., p. 32). Cambridge: Cambridge Univerity Press.

[iv] Ibid., pp. 30.

[v] Hahnel, R. (2002). The abcs of political economy, a modern approach. (p. 11). Sterling: Pluto Press.

[vi] Searle, J. R. (2010). Making the social world, the structure of human civilization. (p. 108). New York: Oxford University Press, USA.

[vii] Ibid., pp. 90-91.

[viii] Brown, A. (2003). Critical realism. In J. King (Ed.), The Elgar Companion to Post Keynesian Economics (p. 83). Northampton: Edward Elgar Publishing Limited.

[ix] Wolff, R. D., & Resnick, S. A. (1987). Economics: Marxian versus neoclassical . (1st ed., p. 134). Baltimore: John Hopkins University Press.

[x] Searle, J. R. (2010). Making the social world, the structure of human civilization. (p. 124). New York: Oxford University Press, USA.

[xi] Hahnel, R. (2002). The abcs of political economy, a modern approach. (p. 11). Sterling: Pluto Press.

[xii] Kropotkin, P. (2002). Anarchism: Its philosophy and ideal. In Dover Ed edition (Ed.), Anarchism A Collection of Revolutionary Writings (2 ed., p. 134). Mineola: Dover Publications.

[xiii] Hodgson, G. M. (2004). The evolution of institutional economics: Agency, structure and darwinism in american institutionalism. (1st ed., p. 44). New York: Routledge.

[xiv] Hopkins, R. (2012). Resilience thinking. In D. Bollier & S. Helfrich (Eds.), The Wealth of the Commons: A World Beyond Market & State (1st ed., p. 19). Amherst: Levellers Press.

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