The Institutions of Economics: A First Approximation

Institutions are socially shared systems of rules of behavior or thought. This article considers the institutions of economics from a theoretical perspective, applying to economics itself ideas that have been used to study institutions in the economy and other domains. The institutions of economics are not often treated as such, but deserve attention not only because they impact the discipline, but also because they interact with economic reality, including institutions in the economy. Particularly important are the mental models socially shared by academic economists. Conformity with these institutions and their sharing can be explained by various social factors, such as the perception of legitimacy or naturality, sanctions, uncertainty, increasing returns to adoption, informational differences, lack of power, and habits. A conventional model is adopted, at least in part, because other agents adopt it, and it is arbitrary in the sense that a non-inferior alternative to it is conceivable. An epistemic social norm implies possible sanctions and may be internalized as legitimate. Despite the profound cognitive and motivational influence of a discipline's institutions, together with other conservative forces, cases of non-conformity do occur and promote change. Prestigious academics are often successful innovators.