Economic and Political Institutional Emergence

Abstract

Defining rules politically poses the general question of which aspects of social ordering are tractable to public institutional resolution. But not all institutions emerge from the same processes of spontaneous ordering; self-interest subject to market discipline looks very different than self-interest subject to political discipline. Because of the structural way in which changes to political rules result in distributional consequences compared to the political status quo, their emergence is fundamentally governed by the dynamics of political self-interest. In contrast, while the public definition of economic institutions is also governed by political self-interest, economic dynamics can redefine this political self-interest in socially beneficial ways. Through the analysis of the emergence of the Australian ballot and the general corporate form in the 19th Century US, I argue that public economic institutional change is a process more tractable to constructivist influence. This is because dynamic economic forces (which operate through mutually beneficial exchange) can disrupt political economic equilibria. In contrast, constructivist political change is necessarily competitive, which makes such change less intrinsically related to longer-term emergent benefits to social ordering.